Roasted! Morrisons loses £17m VAT battle over rotisserie chickens

[ad_1] The UK grocery store chain Morrisons faces a £17m tax invoice after shedding a prolonged court docket battle in opposition to HMRC over the charging of worth added tax (VAT) on rotisserie hen.

The excessive court docket has dominated that entire cooked cool-down chickens must be topic to the usual 20% VAT price for warm meals.

The dispute pertains to modifications launched by the then chancellor George Osborne’s controversial “pasty tax” of 2012, when the Treasury imposed VAT on all scorching takeaway meals bought by bakeries and supermarkets, akin to Cornish pasties, pies and sausage rolls. This prompted a public outcry, forcing the Treasury to partially row again.

The Treasury initially mentioned that meals bought above “ambient temperature” must be topic to VAT. It later determined to use VAT to meals saved in a scorching cupboard, whereas exempting merchandise positioned on a rack which are bought both chilly, or “by the way scorching” however eaten chilly.

Morrisons has argued that its rotisserie chickens shouldn't be taxed as a result of they're both eaten chilly or reheated for dinner.

The court docket ruling famous that Morrisons bought the chickens in luggage with foil lining labelled “warning: scorching product”.

One witness mentioned the chickens weren't displayed on the market for greater than two hours after they have been taken out of the oven. If they'd not been bought by the top of that interval, they have been discarded as waste.

Richard Nichols, the finance director of Morrisons till January, advised the court docket that the corporate’s tax and treasury group had all the time cooperated with HMRC of its personal initiative. He added that Morrisons “operates in a extremely aggressive business sector with low revenue margins” and wanted certainty of tax therapy to tell pricing choices.

He mentioned analysis confirmed that 80% of Morrisons clients shopping for rotisserie chickens ate the hen chilly or for a later meal.

Nichols mentioned the chickens have been sometimes purchased by individuals on decrease incomes, and two-thirds of consumers felt £4.50 was the utmost they'd pay, above the £4.40 worth on the time of the hearings.

With VAT, the value would have risen to £5.28 and “might have resulted in tons of of 1000's fewer chickens being purchased each month, which might have repercussions for the entire provide chain and for balanced diets of households throughout the UK”, Nichols argued. It's unclear whether or not Morrisons will instantly enhance the retail worth of the hen.

Witnesses mentioned after two hours, chickens in a bag had a temperature of between 42C and 45C, whereas a naturally cooling hen can be at 31.8C. The choose mentioned this confirmed that the merchandise have been saved in an setting that retained warmth.

The ruling concluded: “Morrisons did not disclose the warmth and grease/fluid retention options of the hen paper luggage and the truth that cool-down rotisserie chickens have been taken off sale after two hours, while they have been nonetheless nicely above the ambient temperature and weren't on a cooling trajectory that meant that they'd solely be ‘by the way scorching’ when bought.”

The ruling additionally mentioned: “HMRC didn't give clear and unambiguous rulings in 2012-14 that cool-down rotisserie chickens have been zero-rated, which Morrisons had a legit expectation it might depend on.”