Clearwater Hampers Limited v The Commissioners for HMRC [2026] UKFTT 567 (TC)

[2026] UKFTT 00567 (TC)Case No TC 09843
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 2 April 2026Date Judgment date: 10 April 2026
London – Taylor House
Appeal reference: TC/2024/06497
VAT – output VAT – single / multiple supplies – whether lidded wicker baskets ancillary to principal supplies of food and drink gifted in hampers – yes. Appeal allowed.
Before
TRIBUNAL JUDGE AMANDA BROWN KCTRIBUNAL JUDGE MATTHEW DONMALLMICHAEL BELL
Between
CLEARWATER HAMPERS LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMax Schofield of counsel, instructed by VAT Consulting Associates Limited for AppellantOlivia Donovan Litigation Officer of HMRC for RespondentsDECISION

Introduction

[1]This is an appeal brought by Clearwater Hampers Ltd (Appellant) against HMRC’s decision to refuse a claim for the repayment of output tax on supplies of food and drink gift hampers which come packaged in a lidded wicker basket totalling £425,529 over VAT periods 04/20 to 01/24. The Appellant’s case is that the lidded wicker baskets (lidded baskets)in which the items of food and drink (Food and Drink Supplies)come packaged do not constitute separate standard-rated supplies, as HMRC contend, but rather should share the same tax treatment as the Food and Drink Supplies. There is no dispute about the quantification of the Appellant’s claim in the event that it is successful on the substantive issue.

Background

[2]The background chronology to this appeal may be shortly stated. We do not understand there to be any dispute about the facts as set out and found in this background section.[3]The Appellant is an online retailer of food and drink gift hampers (Products), trading from its website at www.hampers.com. With one exception, each Product is comprised of a curated collection of food and drink items presented in one of four types of container, designed to be gifted by the purchaser (Purchaser)to another. The Appellant does not retail any of the component items individually. The four types of container are: a cardboard box (cardboard box); a tray made of bamboo (bamboo tray); an open wicker basket (open basket), and a lidded basket. Each Product is shipped in an outer cardboard shipping carton (shipping carton). (The exception is a seasonal Product consisting of a wicker picnic basket equipped with cutlery and plates (picnic basket) with items of food and drink packed within it. The Appellant accepts that the picnic basket is a separate standard-rated supply.)[4]Some of the food and drink items are standard-rated for VAT, whereas others are zero-rated. The Appellant therefore calculated a composite VAT rate for each Product, based on the relative value of standard-rated items within each Product and zero-rated items within each Product.[5]On 31 October 2023, the Appellant submitted an error correction notification (2023 ECN) claiming repayment of overpaid output VAT in the sum of £1,219,908.63 for periods 10/19 to 07/23 on the basis that in calculating the composite VAT rate for each Product which used a cardboard box, bamboo tray or open basket in these periods, it had should have excluded the value of that container from in the standard-rated portion, on the basis that the container and other packaging did not constitute supplies in themselves but were “incidental” to the Food and Drink Supplies.[6]HMRC accepted the 2023 ECN and on 22 February 2024 repaid the sum in full.[7]On 30 April 2024, the Appellant submitted a further error correction notification claiming a repayment in the sum of £425,529, on the basis that the composite VAT rate applied to Products using a lidded basket (Relevant Products) should likewise have been calculated by reference to the value of the food and drink items alone, excluding the value of the lidded basket itself (the Repayment Claim). The Appellant contended that the lidded baskets were “part of the overall single supply of the food”, on the basis that the lidded baskets served the “dual purposes of presentation and protection” of the luxury food items.[8]On 28 October 2024, HMRC refused the Repayment Claim. That refusal was upheld on review dated 27 November 2024, the reviewing officer being satisfied that the lidded baskets constituted a separate supply with VAT charged accordingly. On 18 December 2024, the Appellant brought the present appeal against that decision.

Relevant legal principles

[9]As the Upper Tribunal observed in R (on the application of Gloucestershire Hospitals NHS Foundation Trust) v Revenue and Customs Commissioners [2023] UKUT 28 (TCC), [2023] STC 350 at [101], there is a wealth of domestic and European authority on the issue of what constitutes a single supply as opposed to multiple supplies for the purposes of VAT. The starting point is that every supply must normally be regarded as distinct and independent. There are however two ways in which something which would otherwise be regarded as a distinct supply becomes part of a wider composite supply with another element or elements (leaving aside specific legislative provision for treatment of closely related activities, not relevant here):(1) There is a single supply where one or more supplies constitute a principal supply and the other supply or supplies constitute one or more ancillary supplies which do not amount to an end in themselves for customers but a means of better enjoying the principal service supplied: see Card Protection Plan Ltd v Customs and Excise Comrs (Case C-349/96) EU:C:1999:93, [1999] STC 270, [1999] 2 AC 601 (CPP Exception).(2) There is a single supply where two or more elements or acts supplied by the taxable person are so closely linked that they form (objectively) a single, indivisible economic supply, which it would be artificial to split: see Levob Verzekeringen BV v Staatssecretaris van Financiën (Case C-41/04) EU:C:2005:649, [2006] STC 766, [2005] ECR I-9433 (Levob Exception)[10]As regards applicable principles when addressing a dispute about whether something constitutes a single composite supply or not, some of those principles pertain to the CPP Exception, some to the Levob Exception, and some to both. So for example in Frenetikexito – Unipessoal Lda v Autoridade Tributária e Aduaneira (Case C-581/19), the Advocate-General at [22]-[30] identified four indications for the purposes of a Levob analysis (to which the Upper Tribunal made reference in Gloucestershire Hospitals at [104]-[106]), and at [34]-[43] addressed indications for a CPP analysis. The CJEU followed this distinction, with more compressed reasoning, at [38-39] (Levob) and [40-42] (CPP).[11]In terms of principles relevant to both CPP and Levob analyses, without seeking to set these out exhaustively we would identify the following:(1) There is no absolute rule and all the circumstances must be considered in every transaction, Gloucestershire Hospitals at [103] citing Honourable Society of Middle Temple v Revenue and Customs Comrs [2013] UKUT 250 (TCC), [2013] STC 1998 at [60].(2) The fact that, in other circumstances, the different elements can be or are supplied separately by a third party is irrelevant, Gloucestershire Hospitals at [103].(3) The principle of fiscal neutrality is not a factor to be taken into account, Middle Temple at [39]. Both the CPP and Levob Scenarios necessarily result in an element of a composite supply being given a different tax treatment to that which would arise if that element constituted a separate supply.(4) The viewpoint to be adopted is that of the typical consumer. That this is common to both CPP and Levob Analyses, see e.g. Spectrum Community Health CIC v HMRC [2024] UKUT 162 (TCC) at [72-74]. Where the customer and the beneficiary of a supply are not the same, it is the customer’s viewpoint that is relevant, Spectrum [83]: in that case, it was NHS England who was the customer of Spectrum’s supply of healthcare services in prisons, rather than the patients [84].[12]As regards principles relevant to the CPP Exception in particular, the CJEU in Frenetikexito observed as follows at [40-42]: …an economic transaction constitutes a single supply where one or more elements are to be regarded as constituting the principal supply, while, by contrast, other elements are to be regarded as one or more ancillary supplies which share the tax treatment of the principal supply (judgment of 2 July 2020, Blackrock Investment Management (UK), C-231/19, EU:C:2020:513, paragraph 29 and the case-law cited). 41 It follows from the Court’s case-law that the first criterion to be taken into consideration in this respect is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 2 July 2020, Blackrock Investment Management (UK), C-231/19, EU:C:2020:513, paragraph 29 and the case-law cited). 42 The second criterion, which in fact constitutes evidence of the first, is that account should be taken of the respective value of each of the benefits making up the economic transaction, one being minimal or even marginal in relation to the other (see, to that effect, judgment of 22 October 1998, Madgett and Baldwin, C-308/96 and C-94/97, EU:C:1998:496, paragraph 24).[13]We may have regard to this notwithstanding that the decision was handed down after the end of the implementation period following the UK’s withdrawal from the European Union, see Gloucestershire Hospitals at [106]. In any case, this articulation merely restates earlier case law, such as Blackrock Investment Management (UK) C-231/19. The essential test is whether, from the perspective of the average consumer, the supply in question does not constitute an end in itself but is a means of better enjoying the principal supply. The respective value of the benefits of the transaction is relevant evidence to that question. Another factor that was identified as relevant in CPP itself was whether there was a single price, which may suggest that there is a single supply but is not decisive.[14]It is notable for present purposes that in AG Kokott’s lengthier analysis at [36], she stated:
“Typical examples of ancillary supplies in the supply of goods are packaging or shipment.”
During the hearing our attention was drawn to earlier cases on both aspects. As regards shipment, we note that CEC v British Telecommunications Plc [1999] STC 758 the House of Lords determined that a transaction for the purchase and delivery of a car was to be analysed as a single supply for VAT purposes, with the delivery being “incidental or ancillary” to the supply of the car [565]. We were also taken to various cases concerning packaging, and we consider these useful illustrations of how decisions have been reached on other facts. (1) CEC v United Biscuits (UK) Ltd t/a Simmers [1992] STC 325 concerned a decorative biscuit tin of ordinary gauge metal which exactly fitted four packets of assorted biscuits, themselves wrapped in cellophane; the packaging represented 55% of the cost of the goods supplied. The Inner House of the Court of Session concluded that the provision of the biscuit tin was subordinate to the supply of biscuits:
“We accept that the tin had a potential after-life as a general purchase container, but on the agreed findings we do not consider it to be so elaborate, expensive or decorative as to qualify as a container in its own right. The tin was incidental to the biscuits rather than the biscuits being incidental to the tin (to take the other extreme) or neither item being incidental to the other.” [329]. (2) Paterson Arran Limited v CCE [1997] Lexis Citation 826 (Decision 15041) concerned biscuits sold in a ceramic jar, which was capable of uses beyond the life of the biscuits therein and indeed of other uses besides that of preserving biscuits. The cost to the manufacturer of the jar was £3, and the biscuits and immediate packaging 82p.The Tribunal “had no doubt in their mind that what was being looked for at Christmas by the giver was a gift from the food section of Boots of a foodstuff - in this instance - biscuits and that that gift should be presented in an appropriate container. The persons who would be purchasing such a gift would not wish a biscuit tin with pictures on it nor would they wish to provide inferior biscuits. They would not wish to provide biscuits as a gift by itself and, in short, would be looking to give a gift of biscuits in a proper container rather than a gift of a kitchen container which happened to contain biscuits as opposed to anything else.” (3) MD Foods Plc v CCE [2001] Lexis Citation 588 (Decision 17080) concerned a product comprising two packs of butter together with a ceramic dish, packaged in a cardboard back, with the butter either side of the dish. Here, the VAT Tribunal observed that the butter dish was the most prominent item in the cardboard package, and it was given the most prominence in the written material on the outside of the package. It found that the butter dish was not ancillary to the butter [26]. (4) Kimberly-Clark Ltd v CEC [2003] EWHC 1623 (Ch), which concerned the sale by the taxpayer to retailers of a month’s supply of nappies packaged in a box labelled as a “toy box”, which could be used for any storage purpose thereafter, with the Huggies nappies contained inside. Lloyd J noted at [36-37] that in any case where a product is sold inside packaging, the purchaser acquires title to the packaging, and in some cases, the packaging will be durable whereas the product is not, such as a container of honey. “The fact that the container has an afterlife and usefulness beyond that of its original contents does not show by itself that there are two supplies or that, if there are, the supply of the container is not ancillary to that of the contents.”
He reasoned that the characterisation of the transaction was to be determined by reference to the supply to the retailer (not the final shopper) [29]. He observed that “The significance for the appellant's commercial customers of the box is that it serves both the basic function of packaging and also a promotional function in seeking to persuade customers to choose this particular brand so as to buy the particular product and maybe in future the same product whether or not in the plastic promotional package.” [40]. He concluded that the supply of the box was ancillary or incidental to that of the nappies.[15]These cases demonstrate the need for attention to the particular customer whose view is being considered (Kimberly-Clark); the ability of packaging to be held ancillary even in circumstances where it was more valuable than the food it contained (Simmers, Paterson Arran) and even if it had significant potential after-life as a container (Simmers, Patterson Arran, Kimberly-Clark), but most of all that each case will depend on its particular facts (so, for example, the factual differences in the nature, packaging and branding of the component elements in MD Foods and Simmers). It is therefore on the specific facts of the present case that we must concentrate.

Evidence and Findings of Primary Fact

[16]We had as evidence before us, in addition to correspondence between the parties, screenshots of various product pages from the Appellant’s website, online reviews feedback, and a witness statement from Patrick Gore, the director of the Appellant. At the hearing we heard oral evidence from Mr Gore, who presented to the Tribunal five example Products which the Tribunal and HMRC had opportunity to examine, and who was cross-examined by HMRC. We found Mr Gore to be a truthful witness, who had evidently thought very hard about how to make his business successful, in particular what its customers wanted, and how the Appellant should most effectively provide that to them. In the light of that evidence, we make findings of primary fact as follows.[17]In terms of the marketing material on the Appellant’s website:(1) Each Product has its own page. There is a single main photograph of the Product as a whole, comprising an arrangement of the constituent food and drink items and the type of container in question.(2) The Product has a name, which is always described as “[something] hamper” irrespective of the type of container that is included. So, for example, the “champagne and belgian [sic] chocolates hamper” comes in the cardboard box, the “wine, cheese & rillette gift hamper” comes in the bamboo tray, and the “premium food and wine hamper” comes in a lidded basket.(3) On the right-hand side of the webpage, there is a subtitle “Hamper Contents”, under which there are five small photographs of individual constituent items, and with a left and right arrow either side, by which someone browsing can click through to see all of the items that are included in the Product. In all but one example before us, the first picture is of the container itself. Additionally, if one of these individual images is clicked, it brings up a pop-up which sets out the name of the item and its product details.(4) The different types of containers are described as follows in these pop-ups: (a) Cardboard box: “A gorgeous cream gift box, with a gold foiled ‘h’ on top” (b) Bamboo tray: no product description given, but entitled (for example) “Large Chestnut Colour Bamboo Tray (380x300x100)” (c) Open basket: “A stunning split willow gift basket, perfect for reusing around the home” (d) Lidded basket: “A premium lidded wicker hamper, topping off the perfect gift for any occasion. This hamper is great for reusing around the home.” (e) Picnic basket: “A premium picnic basket, complete with plates and cutlery for two people”.(5) The Product text under “Product Details” is generally written in a way that refers to the Product as a gift. This is consistent with the tagline to the main hampers.com banner (“bringing joy to gifting”), the first menu option (“ALL GIFTS”), the highlighted option for a free gift message, a statement as regards delivery timeframe (“We can deliver this gift as soon as tomorrow if you order in the next [hours / minutes / seconds]”). For example, the premium food and wine hamper (one of the Relevant Products including a lidded basket): “Gift a little luxury with our Premium Food and Wine Hamper. For the wine lovers, we’ve included a red and white. A juicy fresh Sauvignon Blanc from Kono Wines, bursting with citrus aroma’s [sic] and a Malbec from Gauchezco Estate in Argentina, a full bodied [sic] wine with plump, dark fruit flavours throughout. While sipping on their wines, they can indulge in the array of sweet and savoury treats included. Award winning cheddar, rich fruit cake, dry roasted peanuts and caramelised onion marmalade to name a few! Packed with love into a luxury wicker hamper, this will put a smile on their face when it arrives on their doorstep.”(6) The marketing material therefore used the word “hamper” in at least two ways. First, as a generic term for a gifted package of items in a container, as in the title of every Product, and as implied by the name of the website itself (hampers.com) given the Products it sold. Second, as a description of the lidded basket itself (“a luxury wicker hamper”, “A premium lidded wicker hamper”). This duality of usage was broadly consistent with Mr Gore’s witness evidence that while historically the word “hamper” has been associated with a Christmas hamper of the type that might be bought from Fortnum & Mason, comprised in a lidded wicker basket, increasingly it connotes anything which is a collection of items presented together as a gift, however packaged.[18]As regards the purpose of the packaging from the Appellant’s perspective, Mr Gore explained in general terms that the Appellant seeks to package its Products with two over-arching considerations, those of protection and presentation. This was a running theme of his written evidence (for example: “The packaging that we use serves a very specific purpose – to contain, protect and present the food and wine inside.”; “every food and wine item supplied must arrive pristine and undamaged while being beautiful to unbox”; “The packaging must both present and protect the food inside”). He made similar observations in his oral evidence. He explained how each Product is designed to be packed in a specific way, by way of a ‘packing map’, best to protect and present the items. So for example, glass jars and bottles are packaged in the containers in such a way as to minimise the risk of movement within the container and breakage; the packaging on some items, can ‘blush’ upon the packaging of others if they are adjacent, which would spoil the appearance; as a whole, the way in which the items are packed into wood wool both serves to protect them and to add to a pleasurable ‘unboxing’ experience whereby the component items might be discovered by the recipient of the gift.[19]As regards the specifics of the Products, from what we were shown and the documentary evidence:(1) The cardboard box was described by Mr Gore as a rigid box offering good protection, and that accorded with our evaluation of it, for the size. It consists of a box, which a top element that overlaps the front side and held closed with a magnetic strip. The three sizes in the evidence before us ranged from small (255 x 215 x 110mm) to large (330 x 270 x 120mm). The cardboard box was used for the champagne and Belgian chocolates hamper, so it judged secure enough for such contents. But the overall number and weight of the component elements would generally be fewer/lower than for the Relevant Products presented in a lidded hamper. The cardboard box is used for Products sold at prices ranging from £30 to £60. Each one cost around £1.50 per unit.(2) The bamboo tray was used for light and medium weight gift collections, with prices ranging from £45 to £70, and costing £1.70 per unit. The example we saw included a bottle of gin as well as other items, packaged into wood wool, and the packaged tray was then wrapped with a paper covering. The bamboo tray had the least structural rigidity of any of the container options but nonetheless was judged suitable for safe delivery of the contents, once packaged into the corresponding shipping carton.(3) The open basket was used for somewhat higher priced Products again, ranging from £60 to £100, with a medium weight, and cost around £4.50 a unit. Mr Gore explained how the open basket was “commensurate” with the price of the example Product we were shown, at £69. In that example, there were no items that were hidden under the top layer of items; in other cases, Mr Gore explained that there might be a bottle of wine (for example) on a lower level.(4) The lidded baskets are used for the Appellant’s most expensive items, which range from £95 to £899 (the list price of “the ultimate Christmas hamper”). They cost the Appellant between £9 to £15 depending on size. The example we were shown was made from full reed, with a faux leather clasp and hinges. There is no carry handle, but there are spaces in the woven reed on each side through which fingers can be placed for the purposes of carrying the basket. There was no chemical treatment of the reed for longevity. The basket was sturdy, and the Product example was the heaviest of those we were shown.(5) Finally, the example of a picnic basket Product brought to the hearing was a different picnic basket than that in the documentary evidence, last year’s variants having all sold out, and this being a new type. Both however included plates, cutlery and a corkscrew, came with a carrying handle and two buckled securing straps, and would include a number of food and drink items within. Each picnic basket was purchased wholesale at a cost of £20-£30, and the single seasonal Product was sold last year for £99 (“summer prosecco picnic hamper”), inclusive of prosecco, smoked cheese, crackers, truffle crisps, lemon biscuits and salted caramel fudge.[20]Mr Gore accepted, and we find, that the Appellant does not choose the type of container for each type of gift solely by reference to the need to protect the items within. Mr Gore explained, and we accept, that in every case protection is an important factor. It is self-evident that the Appellant wants to ship Products in a way that minimises the risk of breakages. This is not only because of the costs that would be directly incurred by way of refunds, but also because if items arrived broken or damaged, that would ruin the experience of receiving the gift. In that respect, protection and presentation are not completely separate purposes: the appropriate protection of the items furthers the presentation of the gift. In our view, the primary driver of the use of each type of container is the perceived need on the part of the Appellant to present the Product in a manner that is commensurate with the price being charged. Mr Gore stated in his witness statement, “I would expect that most of our customers would consider it unacceptable if we tried to suggest sending their recipient a food and wine gift collection worth £350 in a cardboard box of any size.”, and he gave a similar statement in oral evidence. In other words, even if it were possible to package the component items safely in a cardboard box, it would diminish the perceived value of the Product being gifted and would not be commercially consistent with the goal of providing a gift presented in a way that is commensurate with the price of that gift.[21]On customer feedback, the reviews date from January to October 2025. Mr Gore gave evidence that he put the reviews into a spreadsheet and analysed them for the number that were referring to packaging, which was about 0.8% of the whole. The Appellant’s skeleton asserted that none of the reviews indicate that any of the Products was packaged in order to obtain a lidded basket, and HMRC did not take us to any example to contradict this. As a matter of impression, we note that there are several reviews that refer to the gift being “beautifully packaged” or words to similar effect. As a whole, we do not put great weight on this review evidence, but do consider that it is consistent with Mr Gore’s witness evidence that “From my experience of running this business for 15 years, it is my view that our customers want to buy and gift wonderfully presented food and wine collections which are delivered safely and without breakages, in attractive packaging which is fit for purpose.”

Submissions of the parties

[22]We set out below a summary of the submissions of the parties with the aim to do justice to them without unnecessarily lengthening the judgment. We assure the parties that to the extent that an argument has not been fully set out it was nevertheless considered when reaching our conclusion.[23]The Appellant’s primary contention proceeds on a CPP analysis, namely that for the Relevant Products, the lidded basket is incidental to the supplies of food and drink being made, and does not constitute an end in itself for the average purchaser, who is purchasing a collection of food and drink in presentable and appropriate packaging. That customer has no regard for any potential secondary use of the lidded basket by the beneficiary of the gift. Supporting evidence includes that there is a single price paid for the Product; the cost component of the lidded basket is only a small percentage of the total product price; and the fact that the lidded basket may be reused is not a point of distinction with Products using the cardboard box, bamboo tray and open basket, which have all been accepted by HMRC as not constituting separate supplies.[24]In the alternative, the Appellant pursued a Levob analysis, contending that the lidded basket formed an indivisible part, along with the food and drink supplies, of a single “sui generis” supply.[25]For their part, HMRC in their statement of case, skeleton argument and oral submissions made very limited contentions largely focused on two related points. The first was that HMRC’s VAT Notice 701/14 at 6.3 provides: “You must treat the following types of containers as separate supplies in their own right and account for tax on them… hampers and picnic baskets (other than simple cardboard cartons)” and the lidded baskets are “hampers” for the purposes of that provision of the guidance (VAT Notice 701/14 Argument). The overall tenor of this contention is that HMRC’s VAT Notice at 6.3 itself has the force of law as if it were a statute, and we note that reference to this guidance appears, incorrectly but significantly, under the “legislative framework” part of HMRC’s skeleton.[26]A second argument, also predicated on HMRC’s guidance, is that Notice 700 at section 8 (“Output tax for particular situations”) provides, at 8.2 in respect of packaging, that “if the packaging is more than is normal and necessary then there’s a multiple supply (read paragraph8.1 ) and VAT is due on the packaging”; it is argued that the Appellant offers alternative containers for other Products demonstrates that the lidded baskets are not necessary for containment or transport and so there is a separate supply of the same (Notice 700 paragraph8.2 Argument).[27]To the limited extent to which HMRC have sought to engage with the underlying contentions of the Appellant on the CPP analysis, HMRC contend that the baskets are not ancillary because they are capable of being “supplied”, “priced” and “retained” independently, are shown on the website as an individual item in the Product, of “intrinsic value”, “recognised as being distinct products by consumers and “deliberately selected to enhance the perceived luxury of the product”.

Discussion

[28]It was common ground before us that each Relevant Product had a mix of standard-rated and zero-rated food and drink items, as such, this is not an appeal about whether there was a single composite supply or multiple distinct supplies. There were, at a minimum, two supplies in each Product: a standard-rated food/drink supply and a zero-rated food/drink supply. The substance of the dispute was whether there was a distinct third standard-rated supply of the lidded basket, as HMRC contended, or not.[29]Mr Schofield argued that the fact that there might be two “principal” supplies should not preclude a CPP analysis. If packaging was ancillary to a single supply of goods contained in the packaging, then it could and should likewise be ancillary to the goods contained therein, even if some of those goods constituted a standard-rated supply and others constituted a zero-rated supply. For her part, Ms Donovan did not advance any specific argument as to why this would not be the case.[30]We agree with Mr Schofield on this. The CPP Exception is focused on the would-be ancillary supply, because it is the tax treatment of the ancillary supply that changes from what it otherwise would be if a separate supply. We do not see any principled reason why it should matter if it is ancillary by reference to a single other supply or, as here, ancillary to both a standard-rated supply and also a zero-rated supply, provided that the ancillary supply is apportioned accordingly between the two. We consider that it would be anomalous and unprincipled if this were not the case, because that would mean that ancillary packaging of a gift would not be a separate supply if the gift had a single tax treatment, but would be a separate supply if the gift had both zero-rated and standard-rated elements, despite the situation being the same in every other respect, i.e. despite the packaging being no less ancillary.[31]We do think however, that this feature of the present case likely precludes the Appellant’s alternative Levob analysis as articulated to us. A Levob analysis is inherently premised on their being a single, indivisible, complex economic supply, the nature of which then falls to be identified by reference to its predominant element (see further Gray & Farrar International LLP v HMRC [2023] EWCA Civ 121 para 47). But here, the Appellant accepts that the Product cannot constitute a single supply irrespective of the treatment of the lidded basket, because there are inescapably two supplies, a standard-rated food/drink supply and a zero-rated food/drink supply. So, the Appellant ends up by positing both that there are two supplies for its CPP argument, and that there is only one supply for the purpose of the Levob analysis. We do not see how this is tenable, although ultimately it is not a point that we formally have to decide, because for the reasons that follow, we find that the Appellant succeeds on its primary CPP argument.[32]The first step in our analysis is identifying “the average consumer” for the purpose of the CPP test. We find that person whose viewpoint we need to consider is the average Purchaser of the Relevant Products, and that person is generally buying the Relevant Product as a gift which will be received by another. We make this finding in the light of the evidence summarised above, and the centrality of gifting on the Appellant’s website, as well as inferentially from the nature of the Products themselves, as curated collections of ready-chosen food and drink designed and presented for gifting.[33]Then, standing back, the question that we have asked ourselves is whether from the perspective of that average Purchaser, the lidded basket is an aim in itself, or whether it is a means of better enjoying the Food and Drink Supplies. We conclude as a question of fact that the average Purchaser would not consider the lidded basket to be an aim in itself. We find that the essence of the Product is that it is a gift of food and drink items that is attractively and securely packaged in a way commensurate with its value. The lidded basket serves to present and protect the Food and Drink Supplies and thereby is a means of better enjoying them as the gift that the Purchaser intends to give. The supply of the lidded basket is therefore ancillary to the Food and Drink Supplies, and shares their tax treatment, such that the composite VAT rate calculated for the Product as a whole is to be determined from the relative value of the zero-rated and standard-rated Food and Drink Supplies alone.[34]We reach this conclusion in the light of all the facts as set out above. In particular we would note the following:(1) The fact that the lidded basket is capable of reuse does not necessitate the conclusion that it is more than ancillary and is an aim for the Purchaser in itself. This is evident in the case law such as Simmers and Kimberly-Clarke discussed above; indeed many items of packaging, such as a jam jar, are capable of being re-used in some form without amounting to a distinct supply. Further the open basket, bamboo tray and cardboard box are also capable of reuse, and HMRC accept – rightly in our view – that these do not constitute distinct supplies.(2) The Purchaser has no option about which container is used for any particular collection of Food and Drink. For the Relevant Products, the lidded basket is predetermined as the form of container used.(3) We have considered the value of the lidded basket in the context of the price of the Relevant Products as a whole, from £95 to £899, and also what those Relevant Products contain. In view of these points, we do not consider that the lidded basket would constitute an aim in itself. We acknowledge that it is a matter of fact and degree, and the outcome may be different on alternative hypothetical facts - were for example a product to be a single packet of crisps in a lidded basket and sold for £50. But that just underlines the factual sensitivity of these questions. In our view, the Relevant Products are gifts of curated food and drink supplies, in attractive and secure packaging.(4) Our view that the lidded basket serves the twin purposes of presenting and protecting the Food and Drink Supplies in a way commensurate with their value, size and weight is supported by the way that the Appellant changes the container used for its Products as they include more and/or more expensive items of food and drink. So the cardboard box is used for the lower priced Products in the range, through the bamboo tray, open box, and then to the lidded basket for the most expensive items. We do not find that the lidded basket is used only for the purpose of protecting the items within it, although that is a relevant aspect of the use; we also consider that a primary reason for the use of the lidded basket is that it presents the most expensive Products in the range in a way appropriate to their price.[35]As regards HMRC’s arguments, we considered it disappointing that the main points that HMRC ran before us were the VAT Notice 701/14 Argument and the Notice 700 paragraph 8.2 Argument, both of which treated the HMRC guidance relied upon as though it was law, when it is not law and does not accurately reflect the law. We reject both arguments.[36]Taking the VAT Notice 701/14 Argument, we do not consider that the fact that a lidded basket may be described as a hamper (as one of the possible meanings of that word) necessarily means that it is a distinct supply. There is no legislative provision requiring that lidded baskets or ‘hampers’ be considered distinct supplies. We also note that this appears to have been the basis for why HMRC refused the Repayment Claim as regards the lidded baskets, but accepted the 2023 ECN as regards products using cardboard box, bamboo tray or open basket, i.e. because the lidded basket was a “hamper”, and therefore became separate supplies due to VAT Notice 701/14 paragraph 6.3. But this paragraph of HMRC guidance is not law, and this is not a proper basis for the distinction in treatment.[37]We also reject the Notice 700 paragraph 8.2 Argument that the test for us to apply is whether packaging in lidded baskets is “normal and necessary”. That does not reflect the legal principles on either a CPP or a Levob analysis, and HMRC’s argument is therefore wrong as a matter of law. We would also observe that we do not consider on the evidence before us that using a lidded basket to package curated collections of food and drink supplies at prices starting from £95 up to £899 is in fact more than is “normal and necessary” for Products of that value, weight and size. HMRC’s argument largely proceeded on the basis of a comparison with the Appellant’s cheaper, lighter and less sizeable Products.[38]We were also not persuaded by the sundry other points HMRC made. The contentions that the lidded baskets are not ancillary because they are capable of being “supplied” and “priced” “independently” / “recognised as being distinct products by consumers” seem to amount to an (unevidenced) assertion that a lidded basket could be purchased alone from a different retailer. That may or may not be the case, but even were it to be true, that would not alter our conclusion. The point about the separate availability of a supply is generally one raised as an indicator in a Levob analysis (see e.g. Gloucester Hospitals at [104], [116-117]), not a CPP one. In any case, the point would not be decisive, and we repeat the point above that the Purchaser does not have the option whether or not to buy one of the Relevant Products with a lidded basket or not, which seems to us more pertinent to the question of whether the lidded basket is an end in itself to that Purchaser. Second, the suggestions that the lidded basket has “intrinsic value” and has “ongoing utility” are not inconsistent with our conclusion, and we consider that these could equally apply to others of the containers such as open basket. Third, the argument that the lidded baskets are “deliberately selected to enhance the perceived luxury of the product” is in our view a point in the Appellant’s favour, i.e. the lidded basket served to promote the perceived luxury and value of the food and drink being gifted within.[39]For the above reasons, we allow the appeal.

Right to apply for permission to appeal

[40]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 10 April 2026