Morrisons faces £17m tax bill on rotisserie chickens

The retailer’s attempt to persuade the courts that its rotisserie chickens should be exempt from the 20% VAT charge – on the grounds that they were “often taken home and eaten cold” – has been unsuccessful.

According to the High Court judgment, the judge determined that the chickens would remain “well above the ambient temperature” two hours after their removal from Morrisons’ hot food counters.

The judge ruled they were “not on a cooling trajectory that meant that they would only be ‘incidentally hot’ when sold” and concluded that the chickens should be liable to the standard 20% VAT rate.

This follows years of legal disputes concerning the tax liability, which stemmed from a 2012 decision by then-chancellor George Osborne to impose VAT on all hot takeaway food – a charge that became known as the “pasty tax”.

The Treasury subsequently modified the policy, specifying that only products sold above “ambient temperature” would incur VAT. This meant items such as Greggs’ pasties would be exempt.

HMRC specified, however, that rotisserie chickens would be classified as hot food.

Morrisons attempted to challenge the decision by initiating legal proceedings against HMRC. The company contended that the authority had previously designated the chickens as zero-rated for VAT purposes.

During court proceedings, Morrisons maintained that customers would be reluctant to pay higher prices for rotisserie chickens. In testimony provided by Morrisons’ directors in 2021, the supermarket referenced market research indicating that “67% of our customers felt that £4.50 was the maximum they would pay for a cooked chicken (the existing price of rotisserie chickens was £4.40)”.

In a 2021 letter to HMRC that was presented to the court, Morrisons’ senior finance manager Andy Marshall wrote: “Where the supply was subject to the standard rate of VAT, the price would have risen to £5.28 and could have resulted in hundreds of thousands of fewer chickens being bought every month, which would have repercussions for the whole supply chain and for balanced diets of families across the UK.”

The company had maintained that over 80% of customers purchased rotisserie chickens to consume them cold at home or to reheat them in ovens or microwaves.

The judge said that the bags used by Morrisons to package the chickens were foil-lined, noting that these “paper bags, although not designed to retain heat, are heat retentive and, much more importantly, are designed to prevent the leakage of hot fluids and grease”.

Morrisons has not provided a comment on the ruling.