In Clearwater Hampers Limited v HMRC [2026] TC09843, the First Tier Tribunal (FTT) found that lidded wicker baskets supplied as part of a gift hamper were, for VAT purposes, ancillary to the food and drink supplied. They were not a separate standard-rated supply.
Clearwater Hampers Limited (CHL), an online retailer, sold a range of food and drink gift hampers.
- Some of CHL’s Food and drink items were standard-rated for VAT, whereas others were zero-rated.
- CHL calculated a Composite VAT rate for each hamper, based on the relative value of standard-rated and zero-rated items within it.
- On 30 April 2024, CHL submitted an Error correction notice claiming a £425,529 repayment of output VAT. This was on the basis that the composite VAT rate that applied to products using a lidded wicker basket should have been calculated by reference to the value of the food and drink items alone, excluding the value of the lidded basket itself.
- CHL’s view was that the supply of a lidded wicker basket was ancillary to the principal supplies of the food and drink it contained.
- CHL had previously submitted a £1.2m error correction notice in October 2023 on the same basis (i.e. that the containers were incidental to the food and drink supplied) in respect of products supplied in cardboard boxes, bamboo trays and open wicker baskets. HMRC accepted this claim in February 2024.
- HMRC refused CHL’s April 2024 VAT repayment claim.
- HMRC’s position was that the lidded baskets constituted a separate standard-rated supply on which VAT should be charged accordingly.
- Although HMRC had allowed the previous repayment claim, they sought to distinguish that earlier accepted claim from the lidded basket claim. HMRC’s argument was based on the lidded basket falling within the description of a ‘hamper’ in VAT Notice 701/14, which listed ‘hampers’ as a separate supply.
- CHL Appealed to the First Tier Tribunal (FTT).
The FTT applied the guidelines from the Card Protection Plan case, under which a supply is ancillary where it is not an end in itself for the customer but a means of better enjoying the principal supply.
The FTT found that:
- The average customer would purchase the hamper as a gift for someone else.
- From the perspective of that average purchaser, the lidded basket would not be an aim in itself. It was, instead, a means of better enjoying the food and drink.
- In essence, the product was a gift of food and drink items that were attractively and securely packaged in a way commensurate with its value, size and weight.
- The lidded basket served to present and protect the food and drink. Thereby, it was a means of better enjoying them as a gift.
- The fact that a lidded basket was capable of reuse did not automatically result in it being an aim in itself.
- The purchaser had no option about which container was used for any particular collection of food and drink.
- The value of the lidded basket in the context of the price of the product as a whole did not result in the basket being an aim in itself.
- The supply of the lidded basket was ancillary to the food and drink supplied, and as such, shared their VAT treatment.
- The composite VAT rate calculated for the product as a whole was to be determined from the relative value of the zero-rated and standard-rated food and drink supplies alone.
The appeal was allowed.
Editor’s comment
The tribunal was clear that, despite there being two principal supplies with different VAT liabilities (both the standard-rated and zero-rated supply of food and drink), this did not preclude the packaging being ancillary to both, providing it was apportioned appropriately between the two.
The FTT’s comments at paragraphs 35, 36 and 37 in this decision are worth noting, as the tribunal considered it 'disappointing' that HMRC’s main points of argument were based on VAT notices. HMRC had relied on their own guidance as though it were law, not only when it was not, but also when it did not accurately reflect the law.
Useful guides on this topic
Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?
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?
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?
External link