Nestle UK Ltd – Upper Tier decision

Les Howard
VAT Consultant
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I am not the first to make a comment about this case, which considered the VAT liability of Nesquik, and I won't be the last.

I notice, in para 4, that HMRC accept that chocolate Nesquik should be zero rated, but they argued that strawberry and banana flavours should be standard rated. Why? The PVD, art 110 allows zero rating for ‘clearly defined social reasons.’ Therefore, it seems chocolate flavoured Nesquik is properly zero rated!

The FTT had considered the meaning of “beverage” in Sch 1, Group 1, Excepted Item 4 (para 9). It also considered the social policy objectives of zero rating (para 10). A third ‘fiscal neutrality’ argument was made at First Tier, but not pursued at the Upper Tier (para 11).

The Upper Tier decision includes an interesting review of legislative history, including the provisions of the Purchase Tax Act 1963 (PTA). The introduction of VAT meant that purchase tax was abolished, but the relevant (and confusing) wording of Group 1 is based on the descriptions of various foodstuffs in the PTA (paras 12-22).

The carefully argued decision of the Upper Tier includes a section on ‘Anomalies’ (paras 57-59). It lists five. But, it concludes, the existence of anomalies cannot provide a ground for a successful appeal. If you want to win a VAT appeal, you need a better argument.

As we know, the Tribunal found against Nestle. Since chocolate Nesquik remains zero rated, I’ve put it on my shopping list!
The Upper Tier decision is here:

About Les Howard


Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire

I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.


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26th Feb 2018 10:34

Just quickly looked at Sainsbury's and Tesco - they do not seem to be quite following the VAT treatment as the pricing is the same for chocolate Nesquik and the other flavours.

This may be another case of the retailing pocketing the VAT saving, so I'm not sure you've found yourself a bargain yet Les!

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27th Feb 2018 16:13

I expect HMRC will milk this decision for all it's worth.

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