4 recent food VAT cases that show why classification matters more than ever

Over the last year, food VAT has seen a surge in case law activity, with decisions affecting businesses across retail, food manufacturing and hospitality.

This has long been a problem area in VAT. Seemingly small differences in ingredients, nutrition, product design, presentation or sales structure can produce very different outcomes, with significant consequences for pricing, margins and exposure over historic periods.

Here, tax disputes expert Helen Pearson explores four recent VAT decisions — from KFC dip pots in May 2026 to poppadom snacks last year — highlighting the key takeaways and outlining the practical steps that businesses should consider in response.

Recent food VAT case law

1. Queenscourt Limited: dip pots & multiple supplies

Issue: In May 2026, the Upper Tribunal had to decide whether dip pots supplied as part of KFC takeaway meal deals were separate zero-rated cold food items or merely ancillary to a single standard-rated supply of hot takeaway food. Queenscourt argued that — once the meal deal was treated as a multiple supply — the dip pots had to be considered separately for VAT purposes.
 

Why it matters: The case goes well beyond condiments. It deals with how bundled meal deals should be analysed where hot and cold items with different VAT liabilities are sold together. For fast food, retail and hospitality businesses, that distinction can materially affect historic claims, pricing and margin.
 

Key takeaway: The Upper Tribunal rejected the idea that a transaction can be treated as a multiple supply while still allowing one item to be treated as ancillary to another. If the supply is multiple, each component must be assessed on its own VAT treatment.

2. Innovative Bites: the marshmallow scale

Issue: The case concerned whether Mega Marshmallows were ‘confectionery’ and therefore standard-rated or zero-rated food. The remitted issue considered in March 2026 focused on Note 5 and whether the product was a sweetened prepared food normally eaten with the fingers.

Why it matters: The case shows how closely VAT classification can depend on the facts around how consumers actually use a product. Marketing, packaging, intended use and ordinary consumption all became central to deciding whether unusually large marshmallows fell within the confectionery exception like their standard-sized equivalents.

Key takeaway: Classification isn’t driven by instinct or appearance alone. Where a product is mainly bought for roasting or food preparation rather than casual snacking, that evidence may support zero-rating even if the product looks like a sweet treat.

3. Ferrero UK Ltd: Nutella Biscuits & the meaning of “partly covered”

Issue: Ferrero challenged HMRC’s view that Nutella Biscuits were standard-rated because they were “partly covered” with chocolate or a similar product. In October 2025, he Tribunal had to decide whether the visible chocolate-like ring and filling formed part of the biscuit’s outer surface or were simply internal components of the product.

Why it matters: The case is a good example of how a single statutory phrase can have major VAT consequences. For manufacturers, a seemingly small design feature can shift a product from zero-rated food to standard-rated confectionery, with obvious implications for pricing and historic exposure. Even products that may appear similar (such as the McVitie’s Blissfuls biscuits) can have significant differences in VAT treatment. 

Key takeaway: Visibility isn’t the same as a covering. The Tribunal looked at the product as a whole and concluded that the chocolate-like substance didn’t form the outer surface — so the biscuit remained zero-rated.

4. Walkers Snack Foods Ltd: Sensations Poppadoms

Issue: In this case from June 2025, Walkers argued that Sensations Poppadoms should be zero-rated as food and were not caught by the exception for potato crisps and similar products. HMRC contended that — despite the branding — the products were made from potato ingredients and were sufficiently similar to crisps to be standard-rated.

Why it matters: The case underlines that classification disputes are often decided by substance rather than labels. The Tribunal considered composition, texture, manufacturing process, packaging and consumer perception to decide whether the product fell within the crisp’s exception.

Key takeaway: Calling a snack a ‘poppadom’ doesn’t stop it being taxed like a crisp. If the product is made from potato and functions like a crisp in the eyes of the Tribunal, branding alone won’t secure zero-rating.

A common theme

Although these four disputes concerned different products and sales structures, they point to the same underlying issue.

Each case turned on factual distinctions that many businesses might initially see as minor. In this area of VAT, however, those distinctions can be decisive. Whether a dip pot is part of a meal deal, whether a marshmallow’s size affects whether it’s confectionery, whether a filling amounts to a covering or whether a poppadom is really a crisp can determine the VAT treatment of substantial volumes of sales.

The cases also show that HMRC’s view isn’t always the last word. Businesses willing to test an assessment — and with the right factual evidence and technical analysis behind them — can succeed in challenging HMRC’s position.

What businesses should do now

For businesses in food manufacturing, retail and hospitality, the message from the cases is practical as well as technical. You should review whether your current product classifications, promotional structures and pricing assumptions still hold up in light of the recent case law.

In practice, that means checking whether:

• any products may have been incorrectly classified for VAT purposes
• there are historic opportunities to recover overpaid VAT or historic exposures that need to be managed
• new products, recipe changes, packaging decisions or promotional offers could change the VAT analysis
• the business has the factual evidence and technical analysis needed to support its position if HMRC asks questions.

Given the financial stakes involved, it’s often far less costly to review and test a VAT position early than to deal later with an adverse HMRC assessment or a missed repayment opportunity.

How we can help

Our tax disputes team advises businesses across the food and beverage sector on product classification, HMRC enquiries, assessments, appeals and litigation. We also help to review existing VAT treatments, assess the impact of new products or offers and put the right evidence in place before a dispute develops.

Whether you’re launching a new product, revisiting an existing VAT position or responding to an HMRC challenge, specialist advice can help to identify risks early, strengthen the technical position and improve the prospects of a successful outcome.

These cases are a timely reminder that in food VAT, detail matters — and that a proactive review can make a real commercial difference.

If you’re looking for VAT advice or support in this area,call 0333 004 4488, email hello@brabners.com or fill in our contact form.