Crisps – spot the difference: Doritos, Monster Munch, Wotsits and poppadums are standard rated, however Pringles, Skips and Twiglets, are VAT free.
Tag Archives: VAT-foodstuffs
A VAT Did you know?
Kangaroo steak is sold as food in shops – food is zero-rated, but the sale of live kangaroos is standard rated.
VAT: Can Nitrous Oxide be zero-rated food? The Telamara case – no laughing matter
Latest from the courts
In the First-Tier tribunal (FTT) case of Telamara Limited the issue was whether Nitrous Oxide (N₂O) used exclusively for culinary use can be zero-rated.
Background
The appellant supplied N₂O canisters which were used as cream chargers. These were used for whipping cream and creating foams and mousses, and to infuse liquids. The relevant invoices described the product as; “Dairy products misc. Cream/beverage infusers 600 x 8g cylinder”. The chargers were not for medical use. The chargers were certified as Halal products.
Telamara’s customers were wholesalers and the units in which the chargers were sold were in boxes of 600. The packaging states that the contents of the chargers should not be inhaled. If consumed on its own N₂O is tasteless and all but imperceptible and its only effect is on the consistency of the whipped food.
The contentions
Telamara considered that the sale of the canisters should be zero-rated because they were for culinary use as food of a kind for human consumption via The VAT Act 1994, Schedule 8 VAT Act 1994, Group 1, Item 1. It was accepted that the N₂O would not be “eaten on its own” but it nevertheless was said to form an ingredient of all of the food substances into which it was incorporated by infusion or by use of the cream whipper, changing the state and nature of those foods. Furthermore, the appellant claimed unfairness because HMRC had been unable to provide clear guidance on the correct VAT treatment when the business started but HMRC subsequently became certain the supplies were standard rated.
Unsurprisingly, HMRC disagreed, formed a view that the supplies were not of food, and raised an assessment for the output tax it deemed to be due on the standard rated supplies.
Decision
The appeal was dismissed. It was found that the chargers were not food because N₂O:
- had no nutritional value
- is a food additive, not food
- does not add to the calories of food
- is odourless, colourless, and tasteless
- is a gas and therefore incapable of being either eaten or drunk
The Tribunal concluded that the gases were standard rated as they were not food of a kind used for human consumption. It concluded that no informed and broad-minded person considering whether the gases were food would conclude that they were.
Commentary
Yet another “Is it food?” case adding to a long list. The Tribunal helpfully set out (drawing from an extensive and thorough review of the very many cases which have considered the scope of zero-rating of food) the required exercise considering and weighing up the following factors to answer the question of whether something is food:
(1) Nutritional value
(2) Palatability
(3) Form of the product
(4) Manner of/directions for consumption
(5) Frequency of consumption
(6) Marketing
(7) Purpose of the product
(8) Range of uses
(9) Constituent ingredients
(10) Dictionary definition of food
Summary
Is it food? is not as a straightforward question as it may seem!
We recommend that any business which is involved in ‘food” or “food-like” products should undertake a review in light of this case. We can, of course, help with this .
A VAT Did you know?
Sweetened rice cakes are zero-rated, but savoury flavoured ones are VATable.
BUT… The problem area is salted rice cakes. Lightly salted cakes are considered to require further preparation before consumption (and are therefore zero-rated) whereas more heavily salted rice cakes do not and are standard rated. However, there is no guideline as to where this borderline falls .
A VAT Did you know?
Lugworms and maggots are standard rated, unless they are also suitable for human consumption, in which case they may be zero-rated – Yum.
A VAT Did you know?
The sale of ostriches is zero rated, but kangaroos are standard rated. Both are sold as food.
A VAT Did you know?
In or out?
If a biscuit is covered, even partially, in chocolate the VAT is 20%, but if the chocolate is inside, say a choc chip cookie or a bourbon, it is VAT free.
A VAT did you know?
If you buy a flapjack* from a vending machine in the corridor at work it is VAT free. However, if you buy the same product from a machine in the staff canteen it will be standard rated.
* Of course, zero rating only applies to a “traditional” flapjack and not cereal or energy/sports nutrition bars…
A VAT Did you know?
Fruit pulp is zero-rated, but fruit juice is standard-rated.
VAT: Zero rated “hot” food – a summary
Generally, cold takeaway food and drink is zero-rated (as long as it is not of a type that is always standard-rated, such as crisps, sweets and some beverages including bottled water).
Via VAT Act 1994 Schedule 8, Group 1, the sale of certain food is zero rated. However, there is an exception for supplies in the course of catering. Anything coming within the definition of catering reverts to the general rule and is taxable at the standard rate. The definition of catering includes “any supply of hot food for consumption off those premises…” Note 3 (b).
Historically, there has been many disputes over what food is “hot”. A seemingly straightforward definition one would think, but this is VAT, and case law insists that that is often not the case. A good example is the Eat case.
It may be coincidence, but I have dealt with a number of issues around this recently, so I thought it may be helpful to look at the VAT treatment of different types of food.
Pasties, sausage rolls, pies or other pastries
- If they are hot and straight from the oven: Although the pastry is hot, it is not being kept warm, so therefore there is no VAT
- Left to cool to room temperature: The pasty is not being kept warm, so no VAT is chargeable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp: The pasty is being kept warm so VAT is due
Sandwiches
- Cold food is zero-rated for tax purposes so no VAT.
- Heated for a customer – standard rated per the Eat case.
Bread
- Freshly baked, cooling or cold – the bread is not kept warm, even though it may be straight from the oven, so would be VAT free.
Rotisserie chicken
- If hot from the spit; VAT on takeaway food intended to be served hot is VATable.
- Kept hot in a cabinet, on a hot plate or under a heat lamp – As the food is kept hot and served hot, VAT is applicable.
- Left to cool to room temperature – If the chicken is cooked then left to cool, such as in bags in a supermarket, it will be VAT free.
Takeaways
- such as fish and chips: VAT remains on all takeaway food served hot.
Catering
- All supplies of catering is subject to VAT regardless of what food and drink is being provided. This includes all restaurants and cafés: VAT applies if a supply of food and drink is made for consumption on the premises that it’s supplied in.
This is a general guide and, as case law shows, there will always be products on the “borderline”.
In summary, food that is hot can be treated as cold…