Date posted: 1st Jun 2026
The Upper Tribunal’s decision in Queenscourt v HMRC [2026] UKUT 195, a case about the VAT liability of a cold dip pot supplied as part of a meal deal, at first glance looks like another niche VAT zero-rate food/ meal deal case.
The outcome, that the dip pot should be zero-rated is probably right on the facts, because a chilled dip pot, viewed as a separate supply in its own right, is plainly zero-rated food. Yet that isn’t the real story in this ruling, because in getting there the Upper Tribunal has, in effect, opened up a major can of worms, relying on logic that drags this quarrel squarely into the mainstream.
The consequences go far beyond quick-service dining, reaching retail, hospitality, and any company selling bundled products or services with varying VAT obligations.
The Upper Tribunal’s Reasoning: A Binary Framework
In short, the Upper Tribunal rejected the idea that you can mix and match your analysis between single and multiple supply i.e. you cannot treat some elements of a bundle as a single supply while treating others as separate supplies.
Instead, the Upper Tribunal reasoned this is a binary choice:
- Either the entire transaction is a single composite supply
- Or every element is analysed separately
Because, once KFC meal deals were conceded by HMRC to be a multiple supply, Dip pots had to be treated separately. And therefore, became zero-rated.
Queenscourt doesn’t make it clear how granular the split of multiple supplies needs to be. Do you go down to raw material level? Absurd but that is where the Upper Tribunal reasoning could logically lead.
A sharp contrast with Clearwater Hampers
This approach contrasts sharply with the approach of the FTT in the recent decision in Clearwater Hampers, where the Tribunal took a much more commercial and pragmatic approach:
- Looked at the customer’s perspective
- Asked whether packaging was an “aim in itself”
- Concluded wicker baskets were ancillary to the food supplied
Most real-world bundled supplies are unlikely to neatly fall into an easy binary analysis and an “all or nothing” approach could be a real problem to apply in practice if the Upper Tribunal are correct in their analysis.
What Happens Next
The result in Queenscourt, giving the dip pot a zero rating, could have been reached another way. It could follow a straightforward application of the CPP/Levob principles. That examination would have produced a defensible answer without the collateral uncertainty the binary approach creates.
Whether HMRC appeals, or whether further litigation arises in related contexts (not least Clearwater Hampers), remains to be seen. But the Upper Tribunal’s reasoning as it stands leaves the law in a less settled state than before this case was decided.
Winners, Losers, and Unintended Consequences
If the Upper Tribunal is right, then there will clearly be unintended winners and losers from a binary approach.
Businesses that supply mixed-liability bundles – meal deals, gift packages, service, and product combinations – may find that HMRC’s characterisation now lock the analysis in ways neither party anticipated.
For HMRC, a binary approach that forces more granular splitting of bundled supplies wherever a multiple supply has been conceded or established could open the door to zero-rating claims across a wide range of products currently treated as standard-rated composite supplies (or vice versa). That is a much larger issue than the dip pot dispute that prompted this case.
For taxpayers, a binary analysis creates genuine uncertainty. Most real-world bundled supplies will not fall neatly into a binary analysis, and businesses need to know where they stand.
The reasoning of the Upper Tribunal has created unnecessary uncertainty for taxpayers and a potentially bigger issue for HMRC than they probably bargained for.
What This Means for Your Business
If your business supplies goods or services with different VAT liabilities as part of a bundle or relies on elements being ancillary the reasoning in Queenscourt may affect how those supplies are characterised and taxed.
Please contact Hydeam Sulton to discuss how this decision may affect your VAT position and what steps you can take now.
