When Is Free Wine Not Free Wine? M&S Asks U.K. Judges to Decide

(Bloomberg) -- Marks & Spencer Group Plc is asking judges to grapple with a question that consumers often debate: how free is free wine really?

The upscale supermarket chain is in a London court to appeal a ruling that the free bottle of wine offered alongside a popular dinner deal should be taxed as part of the 10-pound ($13) promotion.

A lower court concluded that the free wine -- average price just under 7 pounds -- wasn’t actually free at all and that sales tax should be charged across the four items of the Dine In offer: the main course, a side, a dessert and the wine itself.

The promotion was immensely popular. M&S itself noted in a court filing the combined value of the food came in at more than 14 pounds. But the grocer has recently had a change of heart, saying in November that it wanted to tweak the "complex and confusing," "profit-dilutive" Dine In offer. It currently offers a "loaded" pizza deal plus two sides and a dessert for 10 pounds.

The U.K. tax authority said Friday the wine should be treated as part of the overall offer.

“What has actually taken place is the sale of four items, not one given away for free,” Andrew Macnab, a lawyer for the revenue and customs agency, said. “It’s not a free gift handed out by M&S on a whim.”

The lower court previously agreed, stating that the discount applied to the four items together, and that any customer walking into a store and requesting a free bottle of wine would be given “short shrift.”

But M&S said that the wine was supplied for free. Its lawyers said in the court filing it could be viewed as a 100 percent discount -- and should be treated separately to the discount on the food.

The chain has often petitioned the courts to decide enduring tax questions, such as are teacakes really cakes or actually biscuits.

In 2009, Britain’s highest court ruled that M&S should be refunded the 3.5 million pounds that U.K. tax authorities wrongly charged on chocolate-covered teacakes for more than two decades.

To contact the reporter on this story: Jonathan Browning in London at jbrowning9@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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