Single vs Mixed supplies - the key 'takeaway'

The case of the "Boneless Banquet"

KFC offer a number of items on its menu which are available to be purchased individually. It also offers various meal deals, bundling together popular items at a discounted price.

For example, a “boneless banquet” consists of the following items:

• Chicken mini fillets
• Popcorn chicken
• Fries
• A side
• A drink
• A dip pot

In December 2022, this meal deal cost £7.99, compared to £12.43 if all items were purchased separately.

VAT Liability: Hot Food vs. Cold Takeaway

Hot food is liable to the standard rate (SR) of VAT, but cold takeaway food can be zero-rated (ZR) for VAT purposes. The question here was whether the dip pots would be ZR, and whether a proportion of the £7.99 should have VAT charged at the zero rate.

Queenscourt had submitted two separate error corrections covering the period from October 2015 to September 2019 to reclaim the VAT it considered it had wrongly accounted for in relation to meal deals, amounting to around £100k.

Single vs. Multiple Supplies

There have been countless tribunal cases (for example, Card Protection Plan and Levob Verzekeringen) which consider the principles around single and multiple supplies, demonstrating just how difficult it is for the taxpayer to get this right.

This case considered specifically what happens when there is a multi-element transaction that is a multiple supply for VAT purposes. It considered whether or not some elements can be grouped together (e.g., chicken and dips) to form their own principal/ancillary supply relationship—where dips are ancillary to the supply of hot takeaway chicken and therefore SR—or whether each element of a multiple supply must be analysed separately for VAT purposes.

It concluded that where a multi-element supply is a mixed supply for VAT purposes, each element must be analysed separately for VAT purposes.

The Tribunal's Conclusion

The Upper Tribunal concluded that the supply of dips in a “boneless banquet” are zero-rated.

HMRC may appeal, but this opens up opportunities and potentially risks for all sorts of wider multiple supplies, such as:

• Subscriptions
• Packages of goods and services
• Service-level agreements (SLA)

It’s probably a good time to think about whether you have got the VAT liability right on any multi-component supplies – and please feel free to reach out if you need some help.