Full Breakdown
Morrisons Faces £17 Million Tax Bill Over Rotisserie Chickens
12/16/2025, 9:41:21 PM
High Court Ruling on VAT Classification
Morrisons, a prominent UK supermarket chain, is facing a £17 million tax bill following a High Court ruling that its rotisserie chickens should be classified as hot food subject to a standard 20% value-added tax (VAT). The court's decision, delivered on December 11, 2025, concluded that the whole cooked chickens, sold in foil-lined bags labeled "caution: hot product," do not meet the criteria for being "incidentally hot," as they remain significantly above ambient temperature for at least two hours after being removed from hot cabinets.
The legal dispute traces back to the controversial "pasty tax" introduced by former Chancellor George Osborne in 2012, which imposed VAT on hot takeaway food sold by supermarkets and bakeries. Although the Treasury later refined the rules, stating that only food kept above ambient temperature would incur VAT, Morrisons argued that its rotisserie chickens were typically consumed cold or reheated at home, and thus should be exempt from the tax.
Arguments Presented by Morrisons
Morrisons contended that approximately 80% of customers purchasing rotisserie chickens consume them cold or reheat them later. Richard Nichols, the company's former finance director, testified that the price increase resulting from the VAT could lead to a significant drop in sales, potentially affecting the supply chain and the dietary options available to families across the UK. He noted that market research indicated that 67% of customers believed £4.50 was the maximum price they would pay for a chicken, which was priced at £4.40 at the time of the hearings. With VAT included, the price would rise to £5.28, which could result in hundreds of thousands fewer chickens sold monthly.
Court's Findings
The court found that Morrisons failed to disclose critical information regarding the heat-retaining properties of the chicken bags and the practice of discarding unsold chickens while still hot. The judge noted that the chickens remained at temperatures between 42°C and 45°C after two hours, indicating they were not on a cooling trajectory consistent with being "incidentally hot." The ruling emphasized that HMRC had not provided clear guidance on the classification of rotisserie chickens in the early years of the policy, but it rejected Morrisons' claim of a legitimate expectation that the products would be zero-rated for VAT.
Implications of the Ruling
The ruling has significant implications for Morrisons and the broader supermarket industry, particularly in terms of pricing strategies and consumer behavior. As the company considers its next steps, including a potential appeal, the outcome of this case may influence how other retailers approach the sale of hot food items in the future.
Official Statements & Responses
Morrisons has not publicly commented on the ruling. However, the court's decision highlights the complexities surrounding VAT regulations and their impact on retailers operating in a competitive market with tight profit margins.
Verbatim Quotes
- “Morrisons failed to disclose the heat and grease/fluid retention features of the chicken paper bags and the fact that cool-down rotisserie chickens were taken off sale after two hours, whilst they were still well above the ambient temperature and were not on a cooling trajectory that meant that they would only be ‘incidentally hot’ when sold.” — High Court Judge
- “Where the supply was subject to the standard rate of VAT, the price would have risen to £5.28 and could have resulted in hundreds of thousands fewer chickens being bought every month, which would have repercussions for the whole supply chain and for balanced diets of families across the UK.” — Richard Nichols, Former Finance Director, Morrisons
- “HMRC did not give clear and unambiguous rulings in 2012-14 that cool-down rotisserie chickens were zero-rated, which Morrisons had a legitimate expectation it could rely on.” — High Court Judge
