Latest from the courts
Like London buses, few cases on the VAT liability of food, then a veritable deluge (although I am unsure whether there can be a deluge of buses…).
Following Eat Ltd and my summary, two further food cases have been heard at First Tier Tribunal (FTT). These are on the subjects of juicing and brownies.
Juice
In The Core (Swindon) the issue was whether fruit and vegetable juices sold as meal replacements were beverages and therefore standard rated or whether they were not beverages and therefore zero-rated as food.
Background
The appellant provides “juice cleanse programmes” (JCPs) which consist of fresh drinkable products made from juicing raw fruits and vegetables and are intended to replace normal meals. The relevant test was how the product was objectively “held out for sale” by the supplier.
What needed to be considered was:
- How is the product marketed?
- Why it is consumed by the customer?
- What is the use to which it is put?
Case law
Similar products were considered in Fluff, Ltd. Roger Skinner and Bioconcepts where the above tests were set out.
Decision
Judging the JCPs by reference to the above tests the Tribunal found that the purchasers of the JCPs purchase them as meal replacements. Customers do not purchase them as beverages (they drink water in addition to consuming the products). They do not therefore purchase them in order to increase their bodily fluid, or to slake their thirst, or to fortify themselves or to give pleasure. The products are deliberately made palatable, in order not to deter consumers from drinking them, and they are not unpleasant to drink, but they are not consumed for pleasure. Customers purchase and consume them as a meal replacement, not as a beverage. As a consequence, they were zero rated food.
Brownies
In Pulsin’ Ltd the issue was whether a raw choc brownies was a cake (zero rated) or a biscuit (standard rated). So, shades of the infamous Jaffa Cake case.
Background
The products in question were individually wrapped bars produced by cold compression of predominantly: dates, cashews, cacao, various syrups, concentrated grape juice and brown rice bran. All ingredients used are intended to be as natural, unprocessed, hypoallergenic and as nutritionally beneficial as possible.
Case law
The cases set out above were also referred to in this case, along with Kinnerton which I considered here although the judge dismissed HMRC’s contention that the decision in that case was helpful in this.
Decision
The judge formed the view that the products do show enough characteristics of cakes to be so categorised. Therefore, all variants of the raw choc brownies were properly classified as cakes and are therefore eligible to be zero rated.
Commentary
What was interesting here was the judge’s comments on the current position regarding food and VAT.
“It is the Tribunal’s view that the current state of the law on the taxation of food items is not fit for purpose and will necessarily present apparently anomalous results as tastes and attitudes to eating change. The Tribunal fundamentally disagrees with HMRC’s guidance that the borderline between cake and confectionary presents few problems. The lines set and perceived by HMRC in the application of this out of date provision (as recognised by them in their anguished consideration of flapjacks and cereal bars) drives anomalous outcomes….”
And so say all of us…
The zero rating of food is complicated as the provision under VAT Act 1994, Schedule 8, Group 1 provide for a wide general description (qualifying for zero rating) subject to excepted items (which must therefore be standard rated) with exclusions and overriding items to those exceptions (which then requalify to be zero rated).