Treatment of ‘free’ bottle of wine supplied with three food items

Marks and Spencer’s appeal concerned the VAT treatment of its ‘dine in for two for £10 with free wine’ promotion. Customers could choose three food dishes on payment of £10 and obtain a bottle of wine or a non-alcoholic beverage which was described as provided ‘free’. The food items sold separately were zero rated but the wine was standard rated. The issue was whether the £10 should be apportioned between the food and wine as argued by HMRC or whether the wine was free of charge for VAT as contended by the taxpayer.

The First-tier Tribunal decided that under the promotion the customer paid £10 to receive the three zero-rated food items and the standard-rated wine. Therefore the £10 consideration must be allocated across all four items.

Marks and Spencer appealed to the Upper Tribunal.

The judges said there was ‘little disagreement about the correct legal test to...