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Lucozade loses ‘functional food’ attempt

18th Nov 2011
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The maker of Lucozade, the sports energy drink, has lost an attempt to prove that it is a “functional food” rather than a beverage, in a ruling that means that the product will be subject to VAT.

Lucozade was trying to prove that the drink is a functional food rather than a beverage, and therefore zero-rated for VAT under section eight to the Value Added Tax Act 1994. Most food is zero-rated for VAT.

However, in a ruling in September (GlaxoSmithKline v HMRC FTC/06/2011) the Tax and Chancery Upper Tribunal ruled that Lucozade Sport is mainly drunk for hydration and pleasure and should be classed as a beverage.

GlaxoSmithKline (GSK) argued that Lucozade’s nutritional qualities should take it outside the category of beverage as its “scientifically-formulated” mixture of carbohydrates, electrolytes and water is primarily consumed for its nutritional properties. The blurb on Lucozade bottles says that the product will provide “fuel” for muscles and help maintain performance in sports for longer.

GSK was appealing against a ruling last year by the First-Tier Tribunal, which said that Lucozade was a beverage.

In the Upper tribunal’s ruling Justice Newey concluded that consumers drink Lucozade Sport for “refreshment and pleasure” when they’re thirsty. Although some people drink Lucozade for energy it is “not mainly purchased or consumed on account of its nutritional ingredients,” Newey said.

Definitions of snacks and soft drinks have kept tax lawyers busy in recent years. In 2009 the Court of Appeal ruled that Pringles were a crisp rather than a food and so subject to VAT.

In 2010 Innocent lost an appeal for a VAT rebate after a tax tribunal ruled that its products should be classed as a beverage rather than "liquefied fruit salad".

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