05/06/2026
Can a pot of BBQ sauce really spark a VAT dispute? Apparently so.
The Upper Tribunal has ruled in favour of KFC franchisee Queenscourt in a recent VAT dispute with HMRC, finding that dip pots sold within meal deals are separate zero-rated supplies, not part of a single standard-rated supply.
HMRC argued the dips were ancillary to the main meal and therefore standard-rated. The Tribunal disagreed: since the meal deal wasn't a single supply, each element had to be assessed on its own - and as cold food, the dips qualified for zero-rating.
The decision may prompt cafés, coffee shops, restaurants and bakeries to revisit the VAT treatment of their meal deals and bundled offers. Whether it's a sauce with a roll, a cold side with a hot meal or a condiment with a takeaway, some components may qualify for separate VAT treatment depending on the specific facts.
VAT on food is one of the trickiest areas of the tax system. If you are unsure about VAT regulations for your café or restaurant, and need help managing the complexities, please do get in touch.