Food | VAT.law

- Live animals normally intended use as foodstuffs refers to animals usually intended to enter food chain

"[55] By using the adverb ‘normally’ in the second part of the phrase in point 1 of Annex III, the EU legislature intended to refer to animals which, usually and in general, are intended to enter the human and animal food chain. That is the case, in particular, for the cattle, sheep, goats and pigs referred to in point a.4(a) of the Law on turnover tax. All supplies of animals belonging to those species may therefore be subject to a reduced rate of VAT, without it being necessary to examine the particular situation of such-and-such an animal." (Commission v. Netherlands C-41/09)

- Horses not usually intended to enter food chain

"[56] By contrast, it is well known that, in the European Union, the equine species is in a different situation from the species referred to in the previous paragraph. As the Advocate General noted in point 65 of his Opinion, horses are not, usually and in general, intended for use in the preparation of foodstuffs, even if some of them will be used for human and animal consumption." (Commission v. Netherlands C-41/09)

- But supply of horse for slaughter is covered

"[57] With regard to the particular situation of horses which, while not normally being intended for use in the preparation of foodstuffs, may nevertheless in some cases be supplied for consumption, it must be considered that, in the light of the EU legislature’s objective of making essential commodities cheaper for the final consumer, point 1 of Annex III must be interpreted as meaning that only the supply of a horse for slaughter in order to be used in the preparation of foodstuffs may be subject to a reduced rate of VAT." (Commission v. Netherlands C-41/09)

CATERING

- Does not matter whether the supply is of services or goods

"[98] I also agree with the learned judge that for the purposes of the definition in the UK legislation it matters not whether the supply in question is of goods or services, provided that the supply is "in the course of catering". Reading his judgment, there does not appear to have been any issue on that aspect of the matter below." (Sub One Limited v. HMRC [2014] EWCA Civ 773, McCombe, Rimer, Briggs LJJ)

Hot food

- Objectively ascertained common intention of supplier and consumer re whether bargain was that product be supplied to be eaten hot

"[197] As explained by McCombe LJ in Sub One at [49], when applying what is now Note (3B)(a), we are looking to find "the assumed common intention of the supplier and the consumer as to whether it is a term of the bargain that the product be supplied in order to be eaten hot". This is an entirely objective enquiry, and we find the terms of the bargain from what each party to the contract says and does (including the presentation of the supply and any advertising)..." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Distinction between being supplied "in order to" be eaten hot v. "could be" eaten hot

"[198] There is a difference between these two articulations of the test. McCombe LJ's test asks whether it is a term of the hypothetical bargain that "the product be supplied in order to be eaten hot", whereas Briggs LJ's question is whether the essential nature of the hypothetical deal was that the temperature of the product was such that it "could be eaten 'hot'". Briggs and Rimer LJJ both agreed with McCombe LJ without adding any further comments of their own, so the test we should apply is that articulated by McCombe LJ." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Intending eating hot must be as a result of supplier's heating

"[200] ... The natural reading of the phrase "has been heated for the purpose of enabling it to be consumed hot" is that it is asking whether the supplier has heated the product so that (as a result of the supplier's heating) the product can be consumed hot. In Sub One the articulation of the test is whether the temperature of the food (such that it could be consumed hot) was an essential part of the bargain. If I need to reheat a product before I can eat it hot, it is less likely (although not impossible - it may take less time to reheat a CDRC than to cook a raw chicken; we had no evidence about this, so we should not ascribe any great weight to this possibility) that its being hot at the point of sale would be an important part of my bargain with the supplier." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Customer survey as evidence of customer behaviour

"[201] The recent customer survey is the only evidence about actual customer behaviour in relation to CDRCs we have. We take on board Mr Watkinson's comments about the relatively small number of customers surveyed and the fact that no one has analysed whether the order in which questions were asked might have conditioned particular responses. It is also important that we do not allow use of the customer survey to turn this into a subjective test (answered by reference to what Morrisons' customers say they wanted). Nevertheless, it is the only evidence of customer behaviour we have, and we should not ignore it.

[202] That survey indicates that nearly all customers (95%) consume CDRCs at home. That is such a very high proportion of purchasers that we suspect a larger sample would be unlikely to produce a materially different result." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Most customers take home to be eaten later + marketing focussing on freshness indicates heating not part of the bargain

"[205] Putting all this together, we do not consider that it is an important, or essential, term of the objectively found bargain between Morrisons and a purchaser of a CDRC that the CDRC has been heated for the purpose of enabling it to be consumed hot." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

Kept hot after being heated (Note 3C(b))

- Looks back from time of supply to when it was heated

""[207] The question here is whether the product "has been kept hot after being heated". The test is applied at the time of supply (to determine the VAT status of the supply) and looks back from that time to the time when the product was heated and asks whether the product has been "kept hot" during that period, so that it is above the ambient temperature at the time of supply.

[208]...This test is looking at what the supplier did in the time between heating the product and supplying it, whereas test (d) is looking at what the supplier does at the time of supply..." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Stored in an environment which provides, applies or retains heat

"[209] The first way in which something is kept hot is "if the supplier stores it in an environment which provides, applies or retains heat". That, it seems to us, is a straightforward factual question. If the supplier stored the cooked product in an environment which provided, applied or retained heat and the product was hot at the time of supply, then it has been "kept hot" for these purposes.

[210] There is no suggestion that CDRCs were stored in an environment which provides or applies heat..." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Environment retains heat if it causes less heat to be lost than would be lost during natural cooling

"[212] We consider that an environment "retains heat" if it causes less heat to be lost than would be lost during the natural cooling process (which we discuss at [220] below); that is the obvious meaning of the phrase (a process can be described as "retaining" heat even if it does not retain all heat) and is suggested by the words of the second limb of Note (3B)(c), even though that limb provides a separate test. So, for an environment to retain heat, it is not necessary that it retains all heat and keeps the product at the same temperature it was at as at the end of the cooking process, although clearly it must retain enough heat to keep it above the ambient temperature at the time of supply; if it did not, the product would not be hot and this test would be irrelevant." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Sealed chicken bag is environment that retains heat

"[215] A sealed chicken paper bag created a condition (external to the CDRC) which affected the state of the CDRC inside it; it slowed down the natural process of cooling and kept the CDRC warmer than it otherwise would have been had it been left to cool naturally.

[216] For these reasons, we consider that CDRCs were stored in an environment (the interior of the chicken paper bags) which retained heat." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Steps taken for the objective purpose of slowing down cooling

""[217] The second way in which something is kept hot is "if the supplier ... takes other steps to ensure it remains hot or to slow down the natural cooling process". This is a more nuanced test since it is asking not only what the supplier did (Did they take steps which ensured the product remained hot or slowed down the cooling process?) but also whether they took those steps (whatever they might be) "to ensure [that the product] remains hot or to slow down the natural cooling process". In other words, the second limb of the test is also asking why the steps/s were taken. As we have already explained (at [197] above), given the government's stated objective of introducing straightforward, objective tests, we were surprised to see these words used; we would have expected the test simply to ask whether the supplier took other steps which kept the product hot or slowed down the natural cooling process.

[218] We agree with Ms Sloane that this limb of Note (3B)(c) requires an objective view of purpose.

...

[227] Looked at objectively, in the light of the obvious marketing advantages of a chicken being sold as fresh, juicy, tasty and roasted right here also being hot, and the obvious desirability of not losing sales to customers for whom temperature was an important consideration, viewed objectively one of the purposes of packing the CDRCs in chicken paper bags was to retain heat and slow down the natural cooling process." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Packaging that retains heat (whether or not primarily designed for that purpose) - uncertain meaning

"[263] There is clearly a range of interpretations of the first limb of Note (3B)(d) and we summarise briefly below how CDRCs supplied in chicken paper bags would fare under the possible interpretations we have identified:

(1) If we interpret the provision literally, the chicken paper bags retain heat and that (as it does not matter whether the bags were designed for that purpose) is the end of the matter and the CDRCs would be supplied in packaging of a type described by the first limb of Note (3B)(d);

(2) If Mr Watkinson is right and the provision is to be interpreted literally subject to a "de minimis non curat lex" override, there is no suggestion that the chicken paper bags have a minimal effect on the natural cooling process (and the results of Mr Whittaker's research rather suggest the opposite), so again the CDRCs would be supplied in packaging of a type described by the first limb of Note (3B)(d);

(3) If our preferred reading of the first limb of Note (3B)(d) is correct, the chicken paper bags retain heat and were (whether this test is applied subjectively or objectively) the subject of a careful design process, far more than a "mere paper bag" , and so again the CDRCs would be supplied in packaging of a type described by the first limb of Note (3B)(d);

(4) If Ms Sloane is right and the first limb of Note (3B)(d) simply asks whether the chicken paper bags are "packaging that is specifically designed for the retention of heat" and that test is an objective one, then, given the level of heat retention and the other factors discussed at [221]-[228], we would hold that the CDRCs were provided in packaging specifically (albeit not exclusively) designed for heat retention and so were supplied in packaging of a type described by the first limb of Note (3B)(d);

(5) If Ms Sloane is right and the first limb of Note (3B)(d) simply asks whether the chicken paper bags are "packaging that is specifically designed for the retention of heat" and that test is a subjective one, then (given the evidence of Mrs Whittle and Mr Maestri's letter) it might be that the CDRCs were not supplied in packaging of a type described by the first limb of Note (3B)(d). However, such a subjective interpretation would be at variance with the reasoning in Sub One, which we have held should inform the interpretation of "purpose-type" tests in this legislation, and with the government's explanation of how (through straightforward, objective tests) the revised legislation was designed to cure the mischief it was aimed at. For these reasons we would hold that, if Ms Sloane's analysis is right (which we do not think it is), her interpretation of the first limb of Note (3B)(d) would need to be applied objectively, and so the approach described in this sub-paragraph would not be available to Morrisons.

[264] So, on all interpretations of the first limb of Note (3B)(d), other than the interpretation in [264](5), which we consider to be untenable, we would hold that CDRCs have been provided to customers in packaging that retains heat (whether or not the packaging was primarily designed for that purpose) within the meaning of the first limb of Note (3B)(d)." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Packaging specifically designed to address the consequences of hot, cooked food (e.g.) grease is specifically designed for hot food

"[271] 271. We agree that the fact that HRCs have been put into chicken paper bags does not prove that they were specifically designed for hot food. All we learn from that is that they can cope with hot food, which we already know because CDRCs are hot. Similarly, the fact that cold food has occasionally been put into chicken paper bags does not mean that, looked at objectively, they have not been specifically designed for hot food. It just means that they can cope with cold food as well as hot food, which is hardly surprising. A bag that can cope with hot fluids leaking from a hot, recently cooked chicken will very easily be able to accommodate cold chicken, cheese or ham. Similarly, the fact that cold food can be greasy and its packaging needs to address this issue (where it is relevant) does not mean that chicken paper bags have not been designed with the particular problems of hot, cooked chickens (which clearly present issues of juice/grease leakage of a different nature and scale to those presented by (say) pork pies, which (as everyone knows) tend to be wrapped in a particular type of paper, no doubt to address the (different) issues they present) in mind.[216] For these reasons, we consider that CDRCs were stored in an environment (the interior of the chicken paper bags) which retained heat." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

Marketing

- "Roasted" etc. tells customer that food recently cooked but does not indicate being supplied hot

"[276] We respectfully agree with those comments. Food can be "fresh" without being hot; fruit and vegetables are an obvious example of this. "Roasting" is just as much a description of a cooking process as "Braised" or "grilled". The fact that a CDRC is "oven fresh...roasted right here in store" tells a customer that the CDRC has been roasted quite recently and is fresh but without more does not indicate that it is being supplied hot. The words Morrisons used to advertise CDRCs included "fresh" and "roasted" and similar expressions, but not (except occasionally by mistake, as to which see below) the word "hot". Following their discussions with Officer Dean they eschewed expressions like "There's nothing like hot fresh food from the oven". The only use of the word "hot" is in the warning on the rear of chicken paper bags. The word appears in capitals (as part of the phrase "CAUTION: HOT PRODUCT") but not in particularly large type - on our measurement, no larger than 0.25cm - and on the underside of the bag. Once a CDRC was inside the bag and the bag was placed with the window on the topside, this warning would not be visible to customers until they picked the bag up, and so we do not consider that it contributes to the advertising or marketing of CDRCs." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)

- Selling close to hot products may present commercial advantage, but does not mean marketed as supplied hot

"[284] We do not consider that selling CDRCs from part of the oven fresh counter close to hot food deliberately sold as hot snacks or similar indicates that CDRCs were being advertised or marketed as hot. There was no explicit statement that they were hot, unlike other nearby products, and the part of the counters they were displayed in looked different and were unheated. It may well be that Morrisons perceived a commercial advantage in moving CDRCs closer to other hot food products, perhaps thereby dimming the bright line separating them from HRCs, but it does not follow from this that CDRCs were themselves being advertised or marketed as hot.

[285] For these reasons we have concluded that the CDRCs were not advertised or marketed in a way that indicates that they were supplied hot." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)