UK (Parliament Politics Magazine) – Morrisons faces a £17m tax bill after losing a High Court case over whether its rotisserie chickens should be classed as hot food for VAT purposes.
The British supermarket’s attempt to persuade the courts that its rotisserie chickens shouldn’t be subject to a 20 percent VAT charge since they were “often taken home and eaten cold” was unsuccessful.
The birds would remain “well above the ambient temperature” two hours after being taken out of Morrisons’ hot cabinets, according to a High Court decision.
They were “not on a cooling trajectory that meant that they would only be ‘incidentally hot’ when sold,” according to the court.
The judge determined that the regular 20 percent VAT rate should be applied to the rotisserie chickens.
It comes after years of legal dispute over the tax bill, which began in 2012 when former chancellor George Osborne decided to add VAT to all hot takeaway food—a levy known as the “pasty tax.”
Later, the Treasury softened the rule, stating that VAT should only be applied to goods sold above “ambient temperature.” This would imply that goods like pasties from Greggs would not be subject to the additional tax.
However, HMRC confirmed that rotisserie chickens would fall within the category of hot food.
Morrisons has filed a lawsuit against HMRC in an attempt to overturn the ruling. It stated that the hens had previously been zero-rated for VAT reasons by the authority.
Morrisons contended in court that consumers wouldn’t want to pay extra for rotisserie chickens.
Morrisons cited market research in 2021 as proof, stating that “67pc of our customers felt that £4.50 was the maximum they would pay for a cooked chicken (the existing price of rotisserie chickens was £4.40).”
In a letter sent to HMRC in 2021, seen by the court, Morrisons’s senior finance manager Andy Marshall said:
“Where the supply was subject to the standard rate of VAT, the price would have risen to £5.28 and could have resulted in hundreds of thousands fewer chickens being bought every month, which would have repercussions for the whole supply chain and for balanced diets of families across the UK.”
It claimed that over 80% of patrons brought rotisserie chickens home to either eat them cold or reheat them in microwaves or ovens.
The judge observed that the foil-lined bags Morrisons used to store the chickens were “paper bags, although not designed to retain heat, are heat retentive and, much more importantly, are designed to prevent the leakage of hot fluids and grease.”
Morrisons refused to comment on the decision.
How will this ruling affect other supermarkets’ VAT exposure?
The High Court ruling significantly heightens Handbasket exposure for other UK supermarkets dealing roaster or analogous” cool-down” hot cravens, potentially driving backdated assessments from HMRC for ages like 2017- 2020 where 20 Handbasket wasn’t charged.
Tesco, Sainsbury’s, Asda, and Aldi face analogous arrears as they operate heated roaster displays with” hot product” packaging, preliminarily treated as zero- rated cold food. Experts estimate assiduity-wide exposure could exceed£ 100 million, egging critical checkups and possible prayers to the Upper Tribunal.
Retailers must now charge 20 Handbasket outspoken on these particulars or risk further controversies, likely end costs to consumers via price hikes of 10- 15p per funk. Some may acclimate retailing (e.g., briskly cool-down protocols) to argue cold food status, though the judgment’s focus on marketing and storehouse temperature sets a list precedent.
