Morrisons Loses £17m VAT Battle Over Rotisserie Chickens: What It Means for Shoppers

Major Tax Ruling Hits Supermarket Giant

Morrisons has been hit with a £17m bill after losing a 13-year court fight against HMRC to stop VAT from being charged on its rotisserie chickens. The First-tier Tribunal ruled that cool-down rotisserie chickens are “hot food” and therefore supplies made “in the course of catering,” meaning they are not zero-rated for VAT. This landmark decision could have significant implications for shoppers and other supermarkets across the UK.

The Origins of the Dispute

The battle originates from changes brought in by former chancellor George Osborne’s “pasty tax” of 2012, with the Treasury implementing VAT on all hot takeaway food from supermarkets and bakeries. It went on to decide that VAT should be applied to items stored in a hot cabinet. Food products placed on a rack or to be sold cold or “incidentally hot” were exempt from the tax.

Morrisons has insisted that its rotisserie chickens should not face the tax since they are either eaten cold or reheated for dinner. Research showed that 80% of Morrisons customers buying rotisserie chickens ate the chicken cold or for a later meal.

Key Findings of the Court Ruling

The court ruling, which took place on 11 December, highlighted that the supermarket sold its chickens in bags with foil lining with a “caution: hot product” label. Witnesses argued that a cooling chicken in a bag had a temperature of between 42 and 45°C after two hours. Without the bag, the product would be roughly 31.8°C. The judge concluded that HMRC had never provided specific rules regarding VAT and rotisserie chickens, and added that the retailer had not disclosed material information, including the fact that it removed it rotisserie chickens from sale after two hours, while they remained above ambient temperature.

Impact on Consumers and the Industry

Consumers “are likely going to see an increase in the price of their rotisserie chickens” moving forward unless supermarkets decide to lower their profit margins. “This is applicable not just to Morrisons but to any other supermarket or shop which sells rotisserie chickens and to date has not accounted for 20 per cent VAT on the sales.” The ruling highlights the complexity of food VAT regulations and may prompt other retailers to review their pricing strategies for similar products, potentially affecting family budgets across the country.