Chocolate body paint is zero rated, but a bar of chocolate is standard rated.
Chocolate body paint is zero rated, but a bar of chocolate is standard rated.
Gingerbread men: No tax is due if the figure has two chocolate spots for its eyes, but any chocolate-based additions, such as buttons or a belt, mean VAT is payable.
Latest from the courts
In the First Tier Tribunal (FTT) case of Kinnerton Confectionery Ltd the issue was whether a product could be zero rated as a cooking ingredient, or treated as standard rated confectionary (a “traditional” bar of chocolate.)
Background
The product in question was an allergen free “Luxury Dark Chocolate” bar. It was argued by the appellant that it was sold as a cooking ingredient and consequently was zero rated via The Value Added Tax Act 1994, section 30(2) Schedule 8. HMRC decided that it was confectionary, notwithstanding that it could be used as a cooking ingredient.
Decision
The judge stated that what was crucial was how the chocolate bar was held out for sale. In deciding that the chocolate bar was confectionary the following facts were persuasive:
Commentary
Clearly, the FTT decided that consumers would view the chocolate bar as… a chocolate bar, so the outcome was hardly surprising. This case demonstrates the importance of packaging and advertising on the VAT liability of goods. Care should be taken with any new product and it is usually worthwhile reviewing existing products. This is specifically applicable to food products as the legislation is muddled and confusing as a result of previous case law. This extends to products such as pet food/animal feedstuffs which while containing identical contents have different VAT treatment solely dependent on how they are held out for sale. And we won’t even mention Jaffa Cakes (oops, too late).