Chilangos, a food chain which serves Burritos and other Mexican food, has lost at the First Tier Tribunal its case that supplies of its products should be zero rated.
The tribunal found for HMRC and agreed that the food should actually be standard rated.
This is the latest in a long line of cases looking to determine if a product is “a supply of hot food for the consumption off those premises”. It’s been a contentious area and nearly always the result of the case depends on the exact facts which apply to it. In this instance, HMRC were able to win (and deny a repayment of output tax totalling around £700,000) because Chilangos could not demonstrate that its food was only heated in order to meet Food Health Safety guideline. Rather, the Tribunal decided that the food was heated in order for the customer to consume the food hot.
We are not aware if this case will be appealed by Chilango, but given the amount of money at stake there is a possibility that the decision will be contested. Whatever happens though, it serves as a reminder to businesses that determining the VAT liability of products can be difficult (particularly so in some sectors like food) and hence the provision of advice to determine the position is something that should always be considered.