The Upper Tribunal’s (‘UT’) decision in Queenscourt Ltd v HMRC [2026] UKUT 195 is an important ruling for VAT and for disputes with HMRC, dealing with both how supplies are classified and where taxpayers can challenge HMRC’s behaviour.
Mark Ellis, Partner and VAT specialist, shares why this case isn’t just about VAT on meal deals in the UK, the opportunities and clarification it creates for businesses, and the wider significance of the Tribunal’s comments on public law arguments and HMRC’s conduct.
What is the case about?
The case concerned a KFC franchisee that sold takeaway ‘meal deals’. The question was whether items like ‘cold’ sauce dip pots should be treated as part of a single standard-rated supply of hot food, or as separate supplies of ‘cold’ food which could be zero-rated when viewed on their own. HMRC had initially agreed with the taxpayer’s position and repaid VAT on the dip pot element of the meal deal but later tried to reverse that decision and recover the money.
VAT issue: single vs multiple supplies
On the VAT technical point, the UT firmly rejected the approach taken by the First-tier Tribunal (‘FTT’). The FTT had said the meal deal was a multiple supply but still treated the dip pots as part of a combined (composite) supply together with the hot food element of the meal deal. The UT held that this approach was wrong in law and ruled that once a transaction is properly analysed as a multiple supply, each element must be treated as separate meaning that you cannot then treat some elements as separate while grouping others together.
Tribunal powers and HMRC’s conduct
The second part of the decision looked at whether the FTT can deal with public law arguments about HMRC’s conduct. In this case, the taxpayer argued that HMRC should not be allowed to change its position after previously agreeing the VAT treatment and making a repayment, as this created a legitimate expectation for the business that it could retain the refund.
The UT did not need to decide the point definitively, but its comments are still important. It indicated that the FTT can, in some cases, consider public law arguments where they are closely linked to the tax appeal before it. This is a practical approach and may reduce the need for separate judicial review proceedings in the High Court. However, the UTT also clarified that the FTT’s powers in the public law area are limited, and some legitimate expectation cases will still need to be brought in the High Court instead.
Practical implications for businesses
Overall, the decision provides clearer guidance in two key areas. On VAT liability, it reinforces a strict and structured approach to deciding whether supplies are single or multiple, which will be relevant across many sectors where bundling is common. On disputes relating to unfair HMRC behaviour, it suggests a more flexible approach to which venue (either the FTT or the High Court) taxpayers can raise arguments about HMRC’s behaviour, while still recognising the limits of the FTT.
Businesses that have treated one or elements of a multiple supply bundle as single supplies (whether by their own decision or by virtue of a HMRC ruling) should now revisit their VAT treatment because the UT’s decision is case-law precedent that is binding on HMRC and all businesses unless and until it is overturned on appeal.
Businesses that have an element of their dispute with HMRC that relates to HMRC’s behaviour need to carefully consider the correct venue (either the FTT or the High Court) for any arguments that HMRC’s behaviour or written statements (eg published HMRC guidance) gave the business a legitimate expectation that protects them from HMRC’s assessments.
How we can help
For tailored advice, contact Mark Ellis, Partner at PKF, who specialises in VAT and tax disputes.
