Queenscourt Ltd v Revenue and Customs (VAT - whether dip pots supplied as part of a takeaway meal deal are a separate zero rated supply or whether they are part of a composite standard rated supply alongside the hot food in the relevant meal deal)[2026] UKUT 195 (TCC) (19 May 2026)

Executive summary

The Upper Tribunal heard Queenscourt Ltd’s appeal over VAT treatment of dip pots supplied in KFC takeaway meal deals, and over whether HMRC could recover VAT previously repaid after changing its position. It allowed the appeal in the sense recorded in the neutral citation, but the source text provided does not include the Tribunal’s final substantive conclusions beyond the issues framed and the FTT’s prior holdings.

Key points

• Parties: Queenscourt Ltd appealed against HMRC; the dispute concerned dip pots in takeaway meal deals and HMRC’s recovery of VAT repaid under an earlier error correction notice.
• Holding below: the FTT had held dip pots were part of a single standard-rated supply with the hot food, and that it had jurisdiction to consider legitimate expectation, though HMRC was not prevented from recovering the VAT.
• Issues on appeal: whether the dip pots were a separate zero-rated supply or ancillary to the hot food under a composite standard-rated supply; and whether the FTT had jurisdiction over legitimate expectation arguments in an appeal under s 83(1)(t) VATA against a s 80(4A) recovery assessment.
• Reasoning below: the FTT relied on ECJ composite-supply principles, including CPP and Levob, and treated dip pots as ancillary to the hot food because they were a means of better enjoying it.
• Public law angle: Queenscourt argued HMRC should not be allowed to resile from its initial acceptance of ECN1; HMRC argued the FTT lacked jurisdiction to decide that legitimate expectation claim.
• Sanctions/export-control angle: none apparent on the face of the source text; this is a domestic VAT/composite-supply and public-law jurisdiction case.

Why it matters

This is not a sanctions or export-control case, but it is relevant to sovereign risk and compliance because it shows how tribunal classification disputes can change tax treatment and trigger recovery action when HMRC reverses an earlier position. The jurisdictional fight over legitimate expectation also matters for litigation strategy where regulated entities rely on prior HMRC acceptance.

Implications

For compliance teams, the case underscores the need to document supply characterization carefully for bundled products and to treat prior HMRC acceptance as potentially reversible, especially where repayments were made under error-correction processes. For litigation strategy, it highlights the importance of preserving both VAT-liability arguments and public-law arguments, while testing whether the tribunal has jurisdiction to hear legitimate expectation claims in the specific appeal route used.