Morrisons Hit with £17 Million Tax Liability Over Rotisserie Chicken Controversy

The supermarket giant Morrisons is facing a hefty tax liability of £17 million following the outcome of a legal dispute concerning the application of VAT on its rotisserie chickens.

A ruling from the first-tier tribunal determined that the whole cooked chickens offered by the retailer, headquartered in Bradford, fall under the standard 20% VAT bracket typically associated with hot food items.

Morrisons argued that it should be exempt from what is often referred to as the “pasty tax”—the additional 20% VAT on hot food—since a significant majority of its customers consume the rotisserie chickens after they have cooled down or are reheated at home.

However, the tribunal judge noted that HM Revenue & Customs had not classified the chickens as zero-rated for VAT purposes. Furthermore, Morrisons did not adequately disclose important details regarding the specialized packaging employed to maintain the temperature of the cooked chickens.

This specific tax was established in 2012, providing clarity on how VAT is applied to hot baked products. The introduction of this tax led to considerable public backlash, with critics accusing the government of conducting class warfare against those who enjoy pasties.

In response to the uproar, Mr. Osborne later made a concession by exempting certain products that are allowed to return to “ambient temperatures” while sitting on supermarket and bakery shelves.

In his decision regarding the Morrisons case, tribunal judge Mark Baldwin stated that the supermarket had “failed to disclose the heat and grease/fluid retention features of the chicken paper bags” used for packaging.

Additionally, he pointed out that the retailer did not mention that “cool-down rotisserie chickens” were removed from sale after two hours, even though they remained significantly above ambient temperature and were not positioned to cool down to a point where they would be merely ‘incidentally hot’ when sold.

A spokesperson for Morrisons refrained from commenting on the tribunal’s decision.