Morrisons faces £17m VAT bill after High Court ruling on rotisserie chickens

LONDON — The High Court has ruled that Morrisons must pay about £17 million in value-added tax after determining that the supermarket’s whole cooked ‘cool-down’ chickens are taxable at the standard 20% rate for hot food. The decision, handed down as part of a longstanding VAT dispute with HM Revenue and Customs, centers on how hot takeaway items are treated under policy changes that date back to former Chancellor George Osborne’s 2012 “pasty tax.” The court’s ruling means Morrisons will face a significant bill tied to sales of its rotisserie chickens.

The case traces back to the Treasury’s 2012 decision to apply the 20% VAT rate to hot takeaway foods sold by bakeries and supermarkets, including Cornish pasties. The move prompted a government reversal in later years, with the Treasury exempting products that are sold or eaten cold. The High Court’s decision this week hinges on whether Morrisons’ “cool-down” chickens were sold and presented in a way that conformed to a hot-food classification, even if the product was consumed after cooling. The ruling notes that the packaging for the birds carried a label reading “caution: hot product,” and that the chickens would remain well above ambient temperature for at least two hours after removal from the hot cabinets. Those factors, the court concluded, support treatment as hot takeaway food under the applicable VAT regime.

The court’s interpretation emphasizes how packaging and temperature profiles can influence VAT treatment for prepared foods. Morrisons had argued that its chickens were sold cold or eaten cold, or at least could be consumed cold after purchase. The judgment, however, found that the product’s presentation and temperature trajectory placed it within the hot-food category for VAT purposes. In practical terms, the decision means Morrisons will owe roughly £17 million in additional VAT, plus any interest and penalties that may accrue under HMRC’s assessment process. The ruling underscores the complexity retailers face in classifying ready-to-eat items when temperature and labeling policies intersect with tax rules.

Morrisons declined to comment on the court’s decision late on Tuesday night, and HMRC officials did not publicly dispute the court’s findings. The case has drawn attention not only for the size of the bill but for its potential implications across the retail sector, where many supermarkets operate hot-food counters and rotisserie sections that can blur lines between hot and cold prepared foods. Traders argue that classifications can hinge on nuance—such as labeling, packaging, and how quickly items cool after leaving heat retention equipment—and that such distinctions should be clear to minimize tax disputes. The decision therefore has the potential to influence how other retailers label and market ready-to-eat items, and how HMRC enforces VAT on those items in the future.

Beyond the immediate financial impact on Morrisons, the ruling reinforces ongoing questions about the boundaries of the so-called pasty tax era and how it continues to shape VAT treatment for everyday food items sold in supermarkets and other venues. The government’s earlier backtracking on certain hot-food exemptions created a regulatory environment in which retailers must carefully manage labeling and temperature data to avoid adverse VAT outcomes. The High Court’s decision does not redefine the policy in a broad sense, but it does reaffirm that substances and practices used to keep products hot at the point of sale can be determinative in whether VAT at the hot-food rate applies.

For Morrisons, the £17 million bill adds a material line item to an otherwise steady financial picture in a highly competitive grocery market. It also serves as a reminder that tax classifications for ubiquitous consumer items—such as a rotisserie chicken—can hinge on seemingly small details about how a product is presented and how long it remains above room temperature after purchase. Retailers may review their own labeling, packaging, and storage practices in light of the court’s reasoning, particularly for products that are marketed as hot at the point of sale but consumed after sitting in consumer homes.

The decision comes amid broader discussions about how VAT rules interact with evolving consumer shopping patterns, including increased demand for ready-to-eat meals and at-store dining options. While the ruling applies specifically to Morrisons, it signals to the market that the tax treatment of prepared foods remains a live issue for retailers with hot-food counters. As HMRC continues its compliance activities, supermarkets and other food sellers may re-examine their product labels and temperature controls to ensure that their classifications align with tax rules and avoid unexpected liabilities in the future.