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Dine but don’t Wine about the VAT Bill

Many of us may have indulged in the M&S “Dine in for £10 with Free Wine” deal which comprised of a starter, a main and a desert for £10 with a free bottle of wine.

Retailers generally offer such promotions in the hope that this will attract customers into theirs stores who will, in turn, buy other items.

Unfortunately for M&S, HMRC were not fans of the deal and assessed it to almost £12 million of VAT.

Whilst the food items which were part of the deal were zero-rated for VAT purposes, the wine was not. M&S argued that as the wine was provided free of charge it did not have to account for VAT.

HMRC disagreed and argued that the Dine In deal represented the sale of four items for £10. There was no free gift of the wine and consequently, an element of the £10 should be allocated to the value of the wine.

M&S appealed the VAT assessments to the First tier Tax Tribunal (FTT).  The FTT found in favour of HMRC.

The FTT found that the wine was not supplied free as a customer could only obtain it by paying £10 and taking the food items.  The term ‘free’ was simply being used in a marketing sense, in the same way as a ‘buy one get one free’ deal. The “economic and commercial reality” was that M&S were offering a package of items for £10 and the consideration of £10 had to be apportioned on an appropriate basis between zero-rated food items and the standard rated wine. Typically this would be apportioned on a cost basis or normal retail selling price basis.

This case emphasises the importance to businesses of considering the VAT implications of marketing offers before rolling them out to the public.

If you have any questions or queries about any of the above please contact Sally Hutchings, Senior Associate in our Dispute Resolution team by email at [email protected] or by phone on 0208 971 1048


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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