In Marks and Spencers PLC v The Commissioners for HM Revenue and Customs: [2019] UKUT 0182 (TCC), the Upper Tribunal decided that free wine, supplied in a dine for two £10 with free wine offer was a standard rated supply and the £10 should be apportioned to the supply of both wine and food.

Food is zero rated for VAT, and wine is standard rated.

  • Marks and Spencers (M & S) sales offer entitled customers to buy three specified items: a main course, side dish and dessert for £10, and would be entitled to a “free” bottle of wine or alternative beverage.
  • 99% of customers taking up the offer took the their free wine.
  • M & S argued that as the wine was supplied free of charge, no VAT applied as agreed by their  bespoke retail scheme with HMRC.
  • The retail scheme being a method of determining output tax on retail sales made by large businesses with HMRC, the agreement covered special offers of free gifts and was to allow correct till programming.
  • HMRC argued that the retail scheme did not apply

The UT found that there was a direct link between the supply of wine and the three items of food:

  • The term “free” was clearly being used in a marketing sense, as in “buy two get one free” promotion. The economic and commercial reality was that M&S was offering a package of items – dine in for 2 for £10 with free wine – at an attractive discount to their aggregate shelf price if bought separately.
  • Conversely, where a retailer provided in-store samples of food or beverages free of charge, the economic and commercial reality accorded with such samples being correctly described as “free”.

The result that the wine was not 'free' and the £10 consideration must be allocated across the four items in the offer  for VAT purposes.

As the wine was not free the terms of the bespoke retail scheme did not apply.

Useful guides

VAT on food and catering

External links

Marks and Spencers PLC v The Commissioners for HM Revenue and Customs: [2019] UKUT 0182 (TCC)

Marks and Spencer plc v HMRC [2018] TC06471