HMRC has successfully defended a VAT dispute against WM Morrisons Supermarkets Limited after the retailer challenged the VAT treatment of its cooled rotisserie chickens, arguing that they should be zero-rated.
The case centred on whether Morrisons’ whole “cool-down” rotisserie chickens, sold in store but not kept hot, fell within the definition of hot food for VAT purposes under Note 3B, Group 1, Schedule 8 of the Value Added Tax Act 1994. HMRC maintained that the products were standard-rated, a position upheld by the First Tier Tribunal.
The dispute related to VAT assessments issued on 14 September 2021 and 28 October 2021, covering quarterly VAT periods from 01/17 to 07/20. The total VAT in question amounted to £17,034,932. The tribunal ruled against Morrisons, dismissing the appeal in full.
Morrisons advanced two arguments before the tribunal. The first was the liability argument, contending that the supply of cool-down rotisserie chickens was zero-rated under section 30 and Item 1, Group 1, Schedule 8 VATA as “food of a kind used for human consumption”, and that it did not fall within the exclusion for supplies made “in the course of catering”.
In the alternative, Morrisons relied on a legitimate expectation argument, stating that “HMRC gave clear and unambiguous rulings in 2012-2014 that CDRCs were zero-rated” and that the business had relied on those rulings for more than a decade.
Those earlier HMRC communications followed the introduction of the so-called pasty tax in March 2012. At the time, Morrisons had written to then exchequer secretary David Gauke seeking clarity on the VAT treatment of hot food, which led to a consultation on food held at ambient temperature.
Following that consultation, HMRC stated: “As a result of the responses received to the consultation on this issue the government announced a revised set of tests on 28 May 2012 to define ‘hot food’ for VAT purposes. These revised tests address the concerns raised from the consultation whilst also dealing with the inconsistencies generated from the current rules and without imposing any significant additional burdens. Under the new tests food that is cooling naturally, such as Cornish pasties and sausage rolls, will continue to be zero-rated.”
However, one of those tests focused on whether food was sold in heat-retentive packaging, with examples including “cooked chickens that are sold in heat retentive packaging or packaging designed to prevent leakage of hot fluids or grease”.
At the tribunal, Morrisons argued that HMRC had later changed its position and submitted that “it would be unfair and an abuse of power for HMRC to be able to resile from those rulings retrospectively and assess for past periods”.
Evidence presented by HMRC included photographs from Morrisons’ own operational guidance between 2013 and 2020, showing how the chickens were sold from serve-over counters, where customers selected the product and staff served it.
Although the parties disagreed on many aspects of the case, they accepted that the chickens were “hot at the time it is provided to the customer”. HMRC argued that the objective nature of the transaction showed the chickens were not heated to enable customers to eat them hot.
The tribunal rejected this comparison, distinguishing rotisserie chickens from items such as pies and pasties. It stated: “In our view a chicken or a chicken portion as sold by the appellant is a very different product, being larger, less manageable and covered in fat. To eat it as one would eat a pie or a pasty would be an unpleasantly messy process.”
The tribunal heard evidence from Richard Nichols, Morrisons’ head of tax from 2014 to 2022 and later finance director, who explained that a key focus of the tax team had been compliance with HMRC’s earlier guidance. Despite this, the tribunal concluded that HMRC had not given clear or binding assurances.
Judge Mark Baldwin noted that while HMRC had indicated in 2013 that certain tests may need to be addressed, there was “no indication in the material we have been shown that HMRC ever passed any further comment” on Morrisons’ overall approach.
Counsel for HMRC also warned against relying on external materials to override legislation, stating that “there is a danger in Morrisons seeking to persuade the tribunal by reliance on external aids to interpretation such as consultation documents and responses, Hansard extracts, and HMRC guidance and manuals, to displace clear and unambiguous statutory language”.
In a 101-page judgment, the tribunal found that HMRC had not created a legitimate expectation and that the VAT assessments were correct. The appeal was dismissed following a five-day hearing, and Morrisons’ request for judicial review was also refused.
An HMRC spokesperson said: “We note the tribunal’s decision, which supports our position in this case.”
The decision applies only to WM Morrisons Supermarkets Limited, and there is currently no indication that other supermarket groups are affected.
FTT judgment: WM Morrisons Supermarkets Limited v HMRC [2025] UKFTT 1542 (TC)
