Supermarket chain Morrisons faces a £17m tax bill after losing a legal challenge over whether VAT should be charged on its rotisserie chickens.
The first tier tribunal ruled that whole cooked chickens sold by the Bradford-based retailer should be subject to the standard 20% VAT rate applied to hot food.
Morrisons claimed it was exempt from the so-called “pasty tax” – an added 20% VAT on hot food – as most customers consumed the cooked chickens cold or reheated them later.
However, a tribunal judge said HM Revenue & Customs had not ruled the chickens to be zero-rated for VAT and Morrisons failed to disclose key facts about special packaging it used to control the meat’s temperature.
The tax was introduced in 2012 and clarified the VAT treatment of hot baked goods.
The move prompted a huge outcry, with critics accusing ministers of waging class warfare against pasty eaters.
Mr Osborne later staged a partial climbdown by exempting products that are left to return to “ambient temperatures” on shelves in bakeries and supermarkets.
In his ruling on the Morrisons dispute, tribunal judge Mark Baldwin said the supermarket had “failed to disclose the heat and grease/fluid retention features of the chicken paper bags”.
He said the firm had also failed to report “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”.
A Morrisons spokesman declined to comment on the ruling.
