The small ‘dip pots’ you get with KFC takeaway meals may seem like an insignificant thing – but a recent tribunal case has seen them centre stage in a VAT ruling which has significant implications for food retailers, especially those selling takeaway meal deals.
Queenscourt, the parent company of KFC, challenged a First-tier Tribunal decision that items such as dip pots should be part of a composite standard-rated supply when sold alongside hot food as part of a meal deal. Queenscourt argued that they should be treated as a separate zero-rated supply, even though they were part of such a deal.
This may sound like a trivial matter, but over a four year period it had cost Queenscourt over £100,000 in extra VAT, which they were seeking to recover.
Rather more importantly, if successful, the challenge would also see other component parts of a meal deal (such as coleslaw, cookies, yoghurts and milkshakes) also be zero-rated, as if they had been sold on their own.
The Upper Tribunal agreed, allowing Queenscourt’s appeal, overturning the earlier First-tier tribunal finding.
As well as being good news for Queenscourt, the ruling is important for every other food retailer which offers takeaway meal deals. It allows for the possibility of applying VAT separately to each element of the meal, potentially leading to VAT refunds for businesses that can demonstrate that multiple items are sold with different VAT treatments.
Retailers and restaurants offering meal deals that mix hot and cold items can use this precedent to assess whether they can split bundled supplies for different VAT treatments, potentially unlocking historic VAT overpayment claims.