Rivella (UK) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 November 1999 |
| Date | 19 November 1999 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Bioconcepts Ltd VATNo. 11,287; [1995] BVC 545
C & E Commrs v Beecham Foods Ltd UNK[1972] 1 All ER 498
Orchid Drinks Co Ltd VATNo. 14,222; [1996] BVC 4324
Smith Kline Beecham plc VATNo. 13,674; [1996] BVC 4198
Snapple Beverage Corp (now Quaker Oats Ltd) VATNo. 13,690; [1996] BVC 4203
Zero-rating - Food - Whether drinks named Rivella and Rivella Light standard-rated or zero-rated - Value Added Tax Act 1994 schedule 8 group 1Value Added Tax Act 1994, Sch. 8, Grp. 1, general item 1, excepted item 4 and item 6 overriding exceptions.
The issue was whether drinks manufactured by the appellant and called Rivella and Rivella Light fell within the excepted items from zero-rated food in Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 8 group 1Sch. 8, Grp. 1 and were therefore standard-rated or whether they fell within item 6 overriding the exceptions and were thus zero-rated.
Rivella and Rivella Light were developed in Switzerland in 1951 from a process which created a whey-based, clear beverage that had become as popular in that country as Coca Cola. The appellant introduced it into the UK market in 1999. The drink was made up as to 35 per cent from lactoserum, which is milk from which protein and fat has been removed. To this had been added herb and plant extracts, water, CO2 and sugar (or, in the case of Rivella Light, sweeteners). On 14 May 1999, the commissioners wrote to the appellant in response to a request for a ruling, saying that it was not their policy to zero-rate a drink where the milk content was less than 45 per cent and that having sampled the drink and considered its properties, appearance and packaging, the impression obtained was not that of a milk-based product, so that it was standard-rated.
The appellant contended that the drinks were within item 6 of the overriding exceptions as preparations and extracts from milk. The marketing message emphasised the fact that the product was a health-giving, milk-based product with the unappetising elements removed. That the message had been successful could be seen from the results of market research. There was nothing in the law that said that there had to be a 45 per cent milk content for the product to be zero-rated as food.
The commissioners contended that the can which contained the drink did not promote milk, the only mention of milk being in the list of ingredients, which was in small print at the bottom of the can. Further, the drink was fizzy, transparent in colour, did not have the usual texture or thickness of milk and could not be regarded as a milk drink under the terms of Value Added Tax Act 1994 schedule 8 group 1Grp. 1. While they accepted that lactoserum by itself was zero-rated, because it was simply an extract of milk, the drinks in the instant case had all the other factors, such as appearance, which brought them within item 4 of the excepted items.
Held, allowing the company's appeal:
The commissioners' approach was flawed. The reference to 45 per cent was wholly arbitrary and the commissioners had not contended that the legislation should be construed as requiring milk extracts to comprise the main ingredient of a drink. The largest ingredients of both drinks was in fact water, being 56.58 per cent in the case of Rivella and 63.91 per cent in that of Rivella Light. As explained in one of the leaflets which had been exhibited, "Rivella uses everything from milk except the bad bits". The evidence was overwhelming that Rivella and Rivella Light fell within item 6 of the items overriding the exceptions and their supply was accordingly zero-rated.
[The tribunal set out the facts summarised above and continued as follows.]
Wording almost identical to that found in item 6 of the items overriding the exceptions was considered by the tribunal in Snapple Beverage Corp (now Quaker Oats Ltd) VATNo. 13,690; [1996] BVC 4203. The appellant in that case was arguing that its "Real Brewed Iced Tea" was a preparation of tea and accordingly fell within item 4 of the items overriding the exceptions - "Tea, maté, herbal teas and similar products, and preparations and extracts thereof". Mr Hitchmough [for the appellant] urged us to adopt in this case the same approach as was adopted by the tribunal in the Snapple case, where the tribunal identified four factors which should be taken into consideration in order to decide whether the product fell within item 4, namely:
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(a) the ingredients,
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(b) the manufacturing process,
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(c) the appearance and taste, and
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(d) the marketing and packaging.
It went on to note, however, that the relative weight to be given to these four factors would vary on a case by case basis. By way of example, the tribunal observed that in C & E Commrs v Beecham Foods Ltd UNK[1972] 1 All ER 498, a case concerning purchase tax on Ribena, Lord Reid indicated that "the get up, method of marketing, advertising and user may be determinative".
We agree that we should adopt the approach used by the tribunal in theSnapple case. In that case, the appellant's representative had argued that nothing in the manufacturing process of iced tea removed the characteristics of tea. She said that "Snapple" has the essential characteristics of tea which she called "Teaness". She submitted that...
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