Toffee apples are zero-rated, however, any other fruit which is covered in sugar (or toffee) sold as confectionary is standard rated.
Tag Archives: vat-food
VAT: More on separate and single supplies. The KFC dip pot case
Latest from the courts
In the First-Tier tribunal case of Queenscourt Limited the issue was whether dip pots supplied as part of a takeaway meal deal are a separate zero-rated supply (of cold food) or whether they are part of a single VATable supply of hot food.
Background
The appellant had originally accounted for output tax on the basis that dip pots formed part of a single standard rated supply with other food. However, following advice, it then formed the view that zero-rating applied to these pots and submitted a claim for overpaid output tax. HMRC agreed to repay the VAT claimed.
Subsequently, a further claim as made on a similar basis for a later period. This was considered by a different officer who refused to make the repayment on the basis that there was no separate supply of the dip pots. This called into question whether the payment of the initial claim was correct. The officer considered the previous repayment to have been incorrect and issued assessments in order to recover the amount which had been repaid.
Queenscourt now appealed both against the decision to refuse the repayment claimed in the second error correction notice and also against the recovery assessment relating to the first error correction notice. Moreover, the recovery assessments are invalid as there has been no change in circumstances and no new facts have come to light since HMRC agreed to repay the tax. Alternatively, it argues that HMRC are prevented from recovering the tax, either on the basis of legitimate expectation or estoppel by convention, in each case arising as a result of HMRC’s original agreement that that tax should be repaid.
Decision
The appeal was dismissed.
- On the dip point issue, the FTT stated that it was unlikely the dip would be eaten on its own, or as an end in itself, unlike the coleslaw or cookie elements – It is a means of better enjoying the hot food. Consequently, it is an element of a standard rated single composite supply of hot takeaway food.
- Legitimate expectation – Whilst the Tribunal did have jurisdiction to consider arguments based on legitimate expectation in the context of an appeal against a recovery assessment, it is not in this case sufficiently unfair for HMRC to resile from their initial acceptance of the claim made in the first error correction notice and to apply the correct tax treatment.
- Estoppel – HMRC is not estopped from making or relying on their recovery assessments as there has been no detrimental reliance on the original position taken by HMRC in connection with any subsequent mutual dealings.
Commentary
It is difficult to see the end of single/multiple supply cases, as my previous articles consider:
Here, here, here, here, and how to categorise a supply here.
A VAT: Did you know?
Banana and strawberry flavoured Nesquik drinks are standard rated, but chocolate flavoured Nesquik is zero rated.
A VAT: Did you know?
The sale of a dead horse is VAT free, but a live horse is standard-rated.
(This is not a recommended tax planning scheme).
A VAT Did you know?
Where goods are located in a shop can affect the VAT treatment. Nuts sold in the bakery aisle are VAT free, but those sold with snacks or confectionary are standard rated.
A VAT Did you know?
Size matters Part III – Bay plants are VAT free – as long as they are no bigger than 50cm and they have not been clipped or shaped.
A VAT Did you know?
Chestnuts roasting by an open fire…
Roasted nuts in shells are zero rated, but if the shell is removed they become standard rated.
Ho, ho ho… VAT and nuts in the same sentence. Merry Christmas everybody.
A VAT Did you know?
Popcorn is standard rated, but microwavable popcorn is VAT free.
A VAT Did you know?
The sale of ducks is zero rated, but racing pigeons are standard rated.
VAT: Are Turmeric shots zero rated food? The Innate-Essence Limited case
Latest from the courts
In the Innate-Essence Limited (t/a The Turmeric Co) First Tier tribunal (FTT) case the issue was whether turmeric shots were zero rated food via The VAT Act 1994, Schedule 8, Group 1, general item 1 or a standard rated beverage per item 4 of the Excepted items.
The Legislation
“General items Item No 1 Food of a kind used for human consumption. …
Excepted Items Item No … 4 Other beverages (including fruit juices and bottled waters) and syrups, concentrates, essences, powders, crystals or other products for the preparation of beverages.”
The Product
Turmeric roots are crushed and the pulp sieved to extract the liquid. No additional liquids such as apple juice, orange juice or water are added during the production process.
The Shots contain:
- small quantities of crushed, whole fresh watermelon and lemons which act as a base and provides a natural preservative effect
- fresh pineapple juice
- flax oil and black pepper
All the ingredients are cold pressed to retain the maximum nutritional value of the raw ingredients. The Shots are not pasteurised as this would negatively affect the nutritional content of the Shots. No sugar or sweeteners are added to the Shots. The Shots are sold in small 60ml plastic bottles and it was stated that they provided long term health benefits.
The court applied the many tests derived from case law on similar products, and as is usual in these types of cases, the essence of the decision was on whether the Exception for beverages applied to The Shots.
Whether a product is a beverage (standard rated) is typically based on tests established in the Bioconcepts case (via VFOOD7520) as there is no definition of “beverage” in the legislation. The tests:
- it must be a drinkable liquid that is commonly consumed
- it must be characteristically taken to increase bodily liquid levels, or
- taken to slake the thirst, or
- consumed to fortify, or
- consumed to give pleasure
The principle of the tests is based on the idea that a drinkable liquid is not automatically a beverage, but could be a liquid food that is not a beverage.
The Tribunal found that the Shots were not beverages but zero rated food items. As The judge put it: “In our view, the marketing and customer reviews demonstrate clear consistency in the use to which the Shots are put. The Shots are consumed in one go on a regular, long-term basis for the sole purpose of the claimed health and wellbeing benefits. The purpose of the Shots is entirely functional: to maximise the consumers daily ingestion of curcumin which is achieved by cold pressing the raw ingredients into a liquid. We consider it highly unlikely that a consumer would attempt to ingest the same quantity of raw turmeric in solid form.
The Shots are marketed on the basis of the nutritional content of the high-quality ingredients (primarily raw turmeric) that are stated to support health and wellbeing. The Shots contain black pepper and flax oil, two ingredients that are not commonly found in beverages. The Shots are marketed as requiring regular daily consumption over a long period of time (at least three months) to provide the consumer with the claimed long-term health and wellbeing benefits. A one-off purchase of a Shot would not achieve the stated benefits of drinking a Shot”.
The Tribunal also went to consider the “lunch time pints in pubs” (The Kalron case) issue, but I would rather not comment on whether this is a usual substitute for a lunch…
The appeal was allowed.
Commentary
Yet another food/beverage case. Case law insists that each product must be considered in significant detail to correctly identify the VAT liability and even then, a dispute with HMRC may not be avoided. Very small differences in content, marketing, processes etc can affect the VAT treatment. As new products hit the shop shelves at an increasing rate I suspect that we will be treated to many more such cases in the future. If your business produces or sells similar products, it will be worth considering whether this case assists in any contention for zero rating.