Save content
Have you found this content useful? Use the button above to save it to your profile.
image of granola bars | accoutingweb | Nakd, Organix and Morrisons - confectionery for VAT
iStock_atlasstudio_snack_bars

The VAT snack bar debate rumbles on

by

The saga of Morrisons and VAT on snack bars continues with the first tier tribunal having to reconsider whether the treats in question are confectionery.

26th Mar 2024
Save content
Have you found this content useful? Use the button above to save it to your profile.

In WM Morrison Supermarkets plc vs HMRC [2024] UKFTT 181 (TC), the first tier tribunal (FTT) considered whether 20 different snack bars produced by Organix and Nakd, and sold by Morrisons, were “confectionery”. Broadly, the products were made of dried fruits, nuts and oats with added ingredients according to the product in question, such as Carrot Cake Soft Oaty Bar, Banana Bread Bar, and the Berry Bliss Bar.

Going nuts

The FTT had previously held that the products were confectionery in 2021 ([2021] UFTT 106 (TC)), but this was overturned on appeal by the upper tribunal (UT) in 2023 ([2023] UKUT 20 (TCC)) and remitted back to the FTT. The UT directed that no new evidence could be presented, except the new FTT could taste the products and make further findings of fact based on the original evidence.

Berry wide interpretation

Under group 1 of schedule 8 of the Value Added Tax Act 1994, food for human consumption is zero rated. However, item 2 of the excepted items includes: “confectionery, not including cakes or biscuits”.

HMRC argued that the products were confectionery and Morrisons was arguing that they were not. Morrisons cited a number of dictionaries that broadly defined confectionery as “sweets and chocolates”. The FTT, however, adopted a much broader definition. It considered the dictionary definitions, previous cases and guidance provided in the legislation. It held that confectionery broadly means items of food that:

  1. have been produced by a process of mixing or compounding the ingredients

  2. taste sweet

  3. are normally eaten with the fingers in small quantities as a snack or treat.

This is a very expansive definition and is broader than the explanation of confectionery provided in note 5 to group 1, which states that: “for the purposes of item 2 of the excepted items ‘confectionery’ includes… any item of sweetened prepared food which is normally eaten with the fingers.”

Although note 5 was not relied on by either party, the FTT nevertheless made some passing remarks. The FTT rejected the suggestion that note 5 was a “deeming provision” and considered that the purpose of note 5 is to help provide certainty about the meaning of confectionery. Although the point is not raised in the judgment, it is unclear how it does so if the meaning of confectionery is inherently wider than the wording of note 5 itself.

Fudging it

Equipped with that understanding, the FTT considered the products to be confectionery because they “all look, feel and taste like confectionery products”. They were sweet and sticky to the touch, with a “soft, moist and chewy mouth feel”. The flavours of chocolate, fruits and nuts were common to many types of confectionery. The FTT also considered the “energy density” of the products to be similar to confectionery products, such as nougat and fudge.

As the products were mixed and compounded, and eaten with fingers as a snack, that was enough to bring them within the excepted item.

Raisin’ the bar

The FTT accepted that the principal ingredients of the products, which included dates, raisins, cashews, peanuts, almonds and oats, were not typical of confectionery. However, it rejected Morrisons’ submissions that an ordinary person would not consider a product made from just fruit, nuts and oats to be confectionery. The fruit provided sweetness and the FTT was sceptical that an ordinary consumer would question where the sweetness came from, or would distinguish between sources of sweetness.

It’s what’s on the inside that counts

The FTT also considered how the products were marketed. It was acknowledged that the Nakd bars were aimed at health-conscious consumers and the Organix bars targeted parents of small children who wanted healthier alternatives to sweets or chocolate. 

The FTT nevertheless ultimately attached little weight to the marketing or the perception of the products as healthy, because the purpose of such marketing is to drive sales rather than inform their VAT treatment. Similarly, the placement of the products in the “free from” or “baby food” aisles could be no more than a neutral factor. It only indicated how a retailer perceived the product, and was not capable of changing the nature of the products as confectionery.

Nom de prune

Finally, Morrisons presented an alternative argument that the products were cakes as indicated by the cake-related language used to market the products, such as the Nakd Blueberry Muffin Bar.

The FTT dismissed this argument briefly. Citing Judge Anne Fairpo’s statement in Walkers Snack Foods Ltd vs HMRC [2024] UKFTT 31 (TC) that “nominative determinism is not a characteristic of snack foods”, the FTT held that calling something a cake does not make it so. Naming aside, the products did not share the appearance, taste or texture of fruitcakes or flapjacks.

Replies (11)

Please login or register to join the discussion.

avatar
By JB101
26th Mar 2024 16:26

These food-puns appeal to my taste!

Thanks (1)
avatar
By FactChecker
26th Mar 2024 17:19

There's an opportunity going begging that might bring to a close all these ridiculous examples of our money being wasted on these cases/appeals.
Redefine or add in (IANAL) a comprehensive definition of 'food' under group 1 of schedule 8 of the Value Added Tax Act 1994 (whereby food for human consumption is zero rated).

I'd suggest that food manufacturers have to get a certificate saying that the nutritional benefits to the typical human consumer of eating the product outweigh the known downsides (in this case all that sugar and carbs). Yes it'd be a pain but not dissimilar to the process for claiming 'medical benefits' of a product (and we all know don't we that the leading condition that leads to death in the UK is obesity) - but a lot simpler because it'd be a mechanistic framework, not reliant on 'human trials'.

The advantage?
Manufacturers would then have a simple choice (without recourse to lawyers) ... EITHER get your 'food' certified and automatically it is VAT-exempt, OR don't bother (sell it as a naughty luxury or whatever) and automatically sell it with standard rate VAT applied.

Thanks (8)
Replying to FactChecker:
boxfile
By spilly
26th Mar 2024 23:11

That’s way too sensible an option to ever be adopted!

Thanks (1)
Replying to FactChecker:
avatar
By moneymanager
27th Mar 2024 21:15

Objectively, McDonalds and Kellogs et al would be deemed confectionary.

Thanks (1)
avatar
By johnfrancis
27th Mar 2024 11:52

The author is hereby awarded the CDM and bar!

Thanks (3)
Replying to johnfrancis:
avatar
By Paul Crowley
27th Mar 2024 14:30

Not many will remember that

Thanks (0)
Replying to Paul Crowley:
avatar
By johnfrancis
28th Mar 2024 08:56

Those of us of a certain age ...

Thanks (0)
avatar
By rememberscarborough
27th Mar 2024 14:09

Maybe the problem here, like VAR in football, is not the bars, confectionery etc but the idiotic rules that they are trying to implement but aren't fit for purpose. So many exemptions that there's a whole industry built around trying to bend they law.

Time for a tax system that covers everything rather than trying to give certain vested parties an advantage over the rest of us.

Thanks (0)
Replying to rememberscarborough:
avatar
By Paul Crowley
27th Mar 2024 14:33

Would those vested interests include farmers that absolutely need double cab pick ups, to take the entire family on 'business' trips.
Single cab for three just does not work.

Thanks (0)
avatar
By moneymanager
27th Mar 2024 21:09

Mr Kippling doesn't make exceedingly good cakes but gets a VAT advantage, can't we end this nonsense?

Thanks (0)
avatar
By Open all hours
28th Mar 2024 06:45

A majority (apparently) want to pay more tax to support the NHS. Let’s just have a sales tax on absolutely everything, including basic food, and stop this ridiculousness at the same time.

Thanks (0)