High Court Rules Morrisons Must Pay £17m VAT on Rotisserie Chickens
The High Court has ruled that Morrisons must pay £17 million in VAT on sales of whole cooked cool-down rotisserie chickens, determining that these products are subject to the standard 20% tax rate for hot food.
The ruling is connected to the 2012 Osborne 'pasty tax' changes and HMRC guidance concerning VAT on hot takeaway foods, which differentiate based on ambient temperatures, hot cabinet storage, and rack exemptions. Morrisons sold chickens in foil-lined bags labeled "caution: hot product" and kept them for sale for up to two hours, discarding unsold chickens after this period.
Temperature measurements indicated that the temperature inside the bag after two hours ranged between 42 and 45 degrees Celsius, while the naturally cooled chicken outside the bag measured about 31.8 degrees Celsius, reflecting significant heat retention.
The court found that HMRC did not provide clear and unambiguous rulings from 2012 to 2014 indicating that cool-down rotisserie chickens were zero-rated for VAT; however, Morrisons had a legitimate expectation of such a ruling.
Economically, 80% of Morrisons customers purchase the rotisserie chicken cold or for later meals. The typical price of these chickens is around £4.40, but applying VAT would raise the price to about £5.28, which risks resulting in hundreds of thousands fewer chickens sold each month.
Richard Nichols, Morrisons' former finance director, testified emphasizing the necessity for tax certainty given the low profit margins and the competitive nature of the retail food market.
