In Queenscourt Limited v HMRC [2024] TC09184, the First Tier Tribunal (FTT) found that dip pots supplied as part of a KFC meal deal formed part of a single standard-rated supply of hot food.

Fried chicken takeaway

  • Until 2019, Queenscourt, which operated various KFC franchises, accounted for VAT on the basis that dip pots supplied as part of a takeaway meal deal formed part of a single, standard-rated Supply of hot food.
  • Queenscourt subsequently changed its view, concluding that the supply of a dip pot was a Separate zero-rated supply.
  • An Error correction notice for the period October 2015 and September 2018 was submitted to HMRC in March 2019, with £86,804 in VAT subsequently being repaid to Queenscourt. £75,502 related to dip pots, the balance related to other items such as cookies, yoghurts and milkshakes.
  • A second error correction notice was submitted in April 2020 for the period October 2018 and September 2019. HMRC:
    • Refused the claim in respect of the dip pots on the basis they formed part of a single standard-rated supply.
    • Accepted the claim insofar as is related to items which could be consumed on their own, such as cookies and yoghurts.
    • Issued a recovery assessment in respect of the previously repaid VAT relating to dip pots, on the basis the repayment was incorrect.
  • Following a Statutory review upholding HMRC's position, Queenscourt Appealed to the First Tier Tribunal (FTT).

The FTT found that:

  • There was a single standard-rated supply of hot food.
    • The supply of a dip pot as part of a meal deal was not, for the typical consumer, an aim in itself but a means of better enjoying the hot food included as part of the meal deal. The dip pot was an accompaniment. 
    • There was no evidence that a dip was typically eaten on its own unlike, for example, coleslaw or a cookie.
  • HMRC’s assessment was valid and raised in time.
    • The amount repaid by HMRC in response to the first error correction notice was not an amount which HMRC were liable to pay. The output VAT was properly due by Queenscourt.
    • The fact that the assessment resulted from a mistake made by the HMRC officer who dealt with the first error correction notice did not prevent a valid assessment from being made. It was not necessary for there to have been a subsequent clarification in the law, or new factual evidence coming to light.
  • Queenscourt could not rely on legitimate expectations.
    • Any detriment suffered by Queenscourt was not sufficient to conclude that HMRC’s decision to retract their initial acceptance of the claim and seek to apply the correct tax treatment was so outrageously unfair that it should not be allowed to stand.
  • HMRC were not estopped from making, or relying on, their recovery assessment.
    • There had been no detrimental reliance on the original position taken by HMRC in connection with any subsequent mutual dealings.

The appeal was dismissed.

Useful guides on this topic

Food, catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises? 

Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?

Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?

Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?

External link

Queenscourt Limited v HMRC [2024] TC09184