In Queenscourt Ltd v HMRC [2026] UKUT 00195, the Upper Tribunal (UT) found that dip pots provided as part of KFC meal deals were zero-rated as components of a multiple supply.
Until early 2019, the taxpayer, a KFC franchise operator, treated its meal deals as a single, standard-rated Supply of hot food.
- In March 2019, the taxpayer reconsidered this position and concluded that the bundle was really a Multiple supply, with cold items (including dip pots) capable of being zero-rated. Error correction notices were submitted to reclaim the VAT.
- HMRC initially agreed and repaid VAT, before issuing a recovery assessment on the basis that the repayment relating to dip pots had been made in error, arguing that dip pots were simply ancillary to the hot food.
- The taxpayer appealed to the First Tier Tribunal (FTT).
- In June 2024, the FTT agreed with HMRC. The supply of dip pots as part of a takeaway meal deal was part of a single standard-rated supply of the hot food and dips.
- The taxpayer appealed to the Upper Tribunal (UT).
The UT considered whether the company was making a composite (single) or a multiple supply.
- A composite supply is made when a bundle of items or services is so closely linked that they form a single, indivisible supply.
- The VAT rating of a composite supply is determined by its main component.
- The ancillary components will have the same VAT rate as the main one.
- Multiple supplies contain distinct components that have their own VAT ratings.
The UT addressed the following question: once it is accepted that there is a multiple supply, can some elements still be treated as part of a composite supply within it?
The UT found that:
- It was common ground that the meal deal was a multiple supply containing standard-rated hot takeaway food and zero-rated cold takeaway food (yoghurts, coleslaw and milkshakes), but the FTT had then 're-bundled' the dip pots with the hot food as an ancillary element.
- The FTT had made an error of law: a transaction is either a single composite supply or a true multiple supply. A transaction cannot be a multiple supply containing composite supplies.
- Even low-value items such as dip pots can carry distinct VAT treatment if they are economically independent.
- The dip pots were therefore zero-rated as cold takeaway food.
The appeal was allowed.
Useful guides on this topic
Food, catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises?
Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?
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