The Upper Tribunal has ruled in favour of the taxpayer in a closely watched VAT case on dip pots supplied as part of KFC takeaway meal deals, finding that the dips should be treated as separate zero-rated items rather than folded into a single standard-rated supply of hot food.
The decision overturns the First Tier Tribunal’s 2024 ruling and will be of interest to food retailers selling takeaway meal deals that combine hot and cold items with different VAT treatments.
MHA VAT partner, Sue Rathmell, said: “I am pleased that the Upper Tribunal has agreed with the taxpayer that fast-food meal deals are not automatically single standard-rated supplies. While the case may centre on the humble dip pot, the implications are much wider. This decision gives takeaway food retailers a strong reason to look again at how meal deals are structured for Vat purposes, particularlty where cold items are sold alongside hot food. If a business can show it is making multiple items with different VAT treatments, rather than one bundled supply, there may be scope to apply VAT separately to each element, and potentially an opportunity to make a claim. It is a useful reminder that, in VAT, even the smallest item on the tray can carry real significance.”
