Independent VAT Consultant
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Main entrance to a Morrisons superstore

Morrisons loses £1m VAT case about snack bars


Our favourite topic of VAT and food has again reared its head with a first tier tribunal concluding that a date-based snack bar sold by supermarket Morrisons was standard-rated confectionery and not a zero-rated cake.

27th May 2021
Independent VAT Consultant
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VAT watchers have another food case to add to the infamous Jaffa Cake decision. In a verdict overseen by experienced FTT judge Anne Redston, the confectionary or cake VAT debate centred on Nakd bars.

The total VAT exceeded £1m, covering the four-year period up to 2018, and there were 18 different types of the disputed Nakd bars.

The law                                            

I have always claimed that the VAT legislation on food is the UK’s main defence against an invasion by Martians. If the Martians are given a copy of the law as soon as they land on planet earth, they will immediately return to their homeland on the basis that the human race is completely insane and should be avoided at all costs.

The starting point is that food is zero-rated for VAT purposes but then there are exceptions when food is standard rated, eg a chocolate bar or packet of crisps. But it gets worse, with exceptions to the exceptions and, finally, exceptions to the exceptions to the exceptions.

Over the years, the courts have had to involve themselves in the most ridiculous of hearings – for example, are standard rated crisps really zero-rated potatoes? Is a Jaffa Cake a zero-rated cake or standard rated chocolate biscuit?

The government is fully aware of the situation – the Office of Tax Simplification highlighted the problem in its well-written 2017 VAT review and gave the following example in para 3.4: “A gingerbread man with chocolate eyes is zero-rated but if he has chocolate covered trousers, he will be standard rated.”

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Replies (17)

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By Tom 7000
28th May 2021 09:55

Isn't the answer if you can put it in your mouth and swallow it, its zero rated, unless you are sitting down being served it and then there's 10% vat.

Then chippy owners wouldn't have to work for £5 an hour.

But I guess that would do a lot of us out of a job, so maybe not....

Thanks (0)
Replying to Tom 7000:
By Karen Watson
29th May 2021 11:41

At which point, you simply re-create the problem with the border between food (zero) and medicines (exempt).

Of course, there's the alternative of not relieving ANY of them... *ducks and runs...*

Thanks (0)
Stuart Walker Yellow Tomato Copy
By winton50
28th May 2021 10:15

Neil, are there any instances you can think of where the Office of Tax Simplification has made the tax codes simpler?

Thanks (3)
Replying to winton50:
By sammerchant
28th May 2021 12:14

Wow! "Instances" (plural) ????

Thanks (5)
By rememberscarborough
28th May 2021 10:24

Maybe I need a better foil hat but am I being mad to think that our VAT laws are deliberately so complex to keep a whole army of lawyers and accountants in work? If it was costing them money I suspect VAT would never have been allowed in the first place....

Thanks (1)
By ossyref
28th May 2021 10:37

Why not just have an advanced assurance scheme for food?

Thanks (1)
By cereus77
28th May 2021 10:42

I’m quite a fan of Nakd bars, believing them to be a healthy fruit and nut based alternative to confectionery. I guess in the light of this damning judgment I will have to cut them out! But seriously what a joke - how can anyone, let alone a judge and tribunal maintain there is anything even faintly clear about such arbitrary and semantic definitions.

Thanks (2)
By she2656
28th May 2021 11:56

Wouldn't the supplier of the Nakd bars have an opinion on whether the bars were VATable to advise their customers?
Was Morrison's the only customer who decided they were zero-rated?

Thanks (6)
By ImNotSureBut
28th May 2021 14:49

Does anyone have a link to the full case?

Thanks (0)
Replying to ImNotSureBut:
By fawltybasil2575
29th May 2021 01:27
Thanks (1)
By flightdeck
28th May 2021 19:15

Honesty, can no-one see that chocolate trousers COMPLETELY changes everything? Tsk.

Thanks (1)
Replying to flightdeck:
By Hugo Fair
29th May 2021 13:36

But what if his trousers aren't completely chocolate-covered? What if the trousers are merely in a spotty design (using chocolate for the spots to match his eyes)?

Thanks (1)
By SteveHa
30th May 2021 18:00

Isn't the answer to simply abandon this EU imposed tax, now that we are out of the EU, and go back to a more simpler sales tax?

Thanks (3)
Replying to SteveHa:
By Karen Watson
31st May 2021 22:07

Whatever tax you have, you will always have the same problem. As soon as the principle of exemption for anything is conceded, along come the great minds seeking to bend whatever boundary is set.
And while the EU may have been the proximate cause ofVAT in our case, most countries in the world now have copied it, even if it's called something else. Anyone remember the "simple" Sixties Purchase Tax?

Thanks (1)
Ivor Windybottom
By Ivor Windybottom
01st Jun 2021 08:17

Who has benefitted most from this seemingly doomed appeal... Deloitte LLP maybe?!?

Thanks (2)
By Ian Bee
01st Jun 2021 12:20

I had to look at VAT on food many years ago and quickly had to bring in VAT specialists. As with many of the replies, the arbitrariness of the rules drives you mad but commercially there were serious implications. Competition was so tight that the manufacturer or the retailer would not be able to supply some lines if there was a 20% hike in the retail cost, so arguments about the amount of chocolate used became quite important, however absurd it appears.

Thanks (1)
Jason Croke
By Jason Croke
04th Jun 2021 15:21

Exemptions will always bring rise to those who will seek to exploit those exemptions, whether it is selling your light fittings separate from your house to avoid SDLT thresholds or in this case, food items.

The main issue is that law doesn't keep up with the fast moving world of commerce, only in the last 12-18 months do the UK/EU tax authorities recognise e-books, the original zero rating based on books being printed matter, so until they changed the law, books had to be printed.

Food is an even more fast moving sector, trend is now towards vegetable or quinoa based crisps - one because they are healthier and two because they're zero rated as opposed to potato based crisps as the VAT guidance revolves around potato based snacks as that is all we had in the 70's/80's.

Thanks (1)