This Upper Tribunal case of Queenscourt Limited v The Commissioners for HMRC [2026] looked at the VAT treatment of meal deals sold by a KFC franchisee, focusing on dip pots being sold as part of the meal deals. While that may appear a rather niche VAT point, the case can have wider implications for businesses which provide goods or services as part of a package. 

The background

Queenscourt Limited operates a number of KFC franchises. As part of its offering, Queenscourt’s KFC outlets sold meal deals which packaged together several items for a lower price than if purchased individually. Some of these meal deals included one or more dip pots, which could also be purchased separately. 

Queenscourt had historically accounted for dip pots as forming part of a single standard rated supply of hot takeaway food. But in March 2019 it submitted an error correction notice (ECN) to HMRC on the basis that the meal deal should be treated as a multiple supply, so that the dip pots (and other component parts such as coleslaw and milkshakes) could be zero rated if that is how they’d be treated for VAT if sold separately. This ECN was accepted, and HMRC agreed to repay the £75,502 of VAT. 

A second ECN was put forward in April 2020 to reclaim VAT for a subsequent period. HMRC rejected this claim in respect of the dip pots and, judging the original decision to be wrong also, issued an assessment to recover the amount previously repaid under the original ECN in relation to the dip pots. 

First Tier Tribunal ruling: Hybrid VAT analysis

Queenscourt appealed this decision to the First Tier Tribunal (FTT), which decided on 3 June 2024 that the supply of dip pots as part of a takeaway meal deal was part of a single standard-rated supply of hot food and dips. 

In the FTT’s view:

• the chicken and dip pots formed a single standard rated supply of hot takeaway food, with the dip pots being an ancillary item to the chicken; and
• some other elements of the meal deal (such as coleslaw, cookies and yoghurts) were standalone items which were not necessarily ancillary to another part of the meal deal. 

Its approach was that there could in effect be a hybrid or combination of VAT analyses of the overall meal deal. On the one hand the meal deal was a multiple supply of separate components, but on the other hand within that you could group two or more components together as a single supply (here, the chicken and the dip pots). 

Upper Tribunal ruling: No mixed analysis allowed

Queenscourt appealed the decision to the Upper Tribunal, which rejected the FTT’s approach  “…that there is no reason in principle why two or more elements of a single transaction cannot constitute a single supply whilst, at the same time, other elements of the same transaction may constitute a separate supply.”

After a review of some of the relevant case law, including the ECJ case Card Protection Plan, the Upper Tribunal held that multi-element transactions should either be treated as several distinct separate supplies or a single composite supply. The Upper Tribunal did not like the FT’s approach of allowing a combination of different VAT analyses of elements within the one overall transaction. On this basis, it considered that the FTT had made an error of law in saying that there could be a mixed analysis of the overall meal deal, with some elements being grouped together as a single composite supply (dip pots and chicken), while other elements were treated as separate supplies (yoghurts, coleslaw and cookies).

This led the Upper Tribunal to allow Queenscourt’s appeal on this point, and in this case to conclude that the dip pots supplied as part of a takeaway meal were separate zero rated supplies.  

There were other aspects to the case, including in relation to a public law issue, which we haven’t reviewed here.

Key takeaways from Queenscourt v HMRC 

This case may have implications for any business which sells goods or services in a package, not just to the food and drink sector. Businesses may wish to review their VAT treatment of multi-element supplies they make, where there are potentially different rates of VAT which could be applied to the component parts of supply. One takeaway from this case is that grouping only some elements of a multi-element transaction into a single composite supply is unlikely to be successful.

Please note, however, that as at the date of this note HMRC is seeking permission to appeal this case to the Court of Appeal, so we’ll wait to see if the web of VAT analysis on multi-element transactions becomes yet further entangled.