SiS (Science in Sport) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 January 2001 |
| Date | 01 January 2001 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Amalgamated Investment & Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd ELR[1982] QB 84
Bioconcepts Ltd VAT[1995] BVC 545
C & E Commrs v Beecham Foods Ltd UNK[1972] 1 All ER 498
GUS Merchandise Corp Ltd (1978) VATTR 28
L'Arome International Ltd (in receivership) VATNo. 14,419; [1996] BVC 4374
McCormick (UK) plc VATNo. 15,202; [1998] BVC 4023
Mills v Cooper UNK[1967] 2 All ER 100
Orchid Drinks Co Ltd VATNo. 14,222; [1996] BVC 4324
Premate Builders Ltd No. 655
R v C & E Commrs, ex parte Kay & Co VAT[1997] BVC 128
Rivella (UK) Ltd VATNo. 16,382; [2000] BVC 2179
Smith Kline Beecham plc VATNo. 10,222; [1993] BVC 888
Smith Kline Beecham plc VATNo. 13,674; [1996] BVC 4198
Southend-on-Sea Corp v Hodgson (Wickford) Ltd ELR[1962] 1 QB 416
Tropicana UK Ltd VATNo. 10,907; [1994] BVC 622
Younger No. 1173
Appeals - Tribunal - Practice - Oral agreement to settle appeal - Whether constituting statutory agreement - Whether estoppel by convention - Finance Act 1985, s. 25(3) (Value Added Tax Act 1994 section 85 subsec-or-para (3)Value Added Tax Act 1994, s. 85(3)).Zero-rating - Food - Sports energy drinks - Whether within excepted items - Whether classified as food - Value Added Tax Act 1994 schedule 8 group 1Value Added Tax 1994, Sch. 8, Grp. 1,excepted item 4 and Note (1).
The issues were: (1) whether the matter before the tribunal had been settled by an agreement made in the course of a previous appeal relating to the same subject matter and, as a result, could not be re-opened; and (2) whether the appellant's products, which consisted of sports energy drinks, were food of a kind used for human consumption and not within an excepted item and therefore zero-rated.
The appellant was incorporated in August 1992 and registered for VAT in November 1992. Its products were originally directed to the needs of professional athletes, but this was later widened to include amateur sports persons and others engaged in energetic pursuits. They were PSP22 High Energy Sports Fuel, described as "flavoured and unflavoured carbohydrate powder (principally amylopectin)", PSP11 "a cheaper version of PSP 22, unflavoured (amylopectin with some amylose)", "GO" Electrolyte Sports Fuel "PSP 22 with added salts and fructose", "REGO" Total Recovery Sports Fuel "PSP 22 with added proteins, vitamins, minerals and fructose", KR10 Pure Creatine, KR10 Metabolic "Creatine with PSP 22" and KR10 Dual Action "Creatine with PSP 22 and lactic acid". The KR 10 products were based on creatine, which is a natural organic substance and is protein. The object of taking them was to provide a nutritional supplement. The flavoured PSP22 was described as helping to increase carbohydrate intake before exercise and speeding recovery after it. All the products were sold for their nutritional value and none was primarily marketed as a drink. Shortly after registration the appellant corresponded with the commissioners concerning the VAT liability of its various products. Noting that the packaging of PSP22 and KR10 described them respectively as "a refreshing drink" and "a pleasant tasting drink", Customs ruled by letter of 11 May 1993 that those products were standard-rated as being sold as preparations for making beverages and within the excepted items. An appeal was lodged. However, on 3 November 1993, Customs wrote to the appellant stating that they had reconsidered their policy on what constitutes a beverage following Bioconcepts Ltd VAT[1995] BVC 545 and now accept that these products are zero-rated and that "I understand that you will formally be withdrawing the appeal on receipt of this letter". In consequence, the appeal did not proceed, the appellant being paid its reasonable costs consequent upon the commissioners' decision, and the products were sold as zero-rated items. However the appeal was never formally withdrawn. In December 1997, Customs changed their policy on the VAT treatment of "sports energy drinks" and in a letter dated 19 August 1998 they wrote to the appellant ruling that its products were to be standard-rated from 1 December 1997. An assessment to recover the tax due consequent upon the decision followed and the company appealed.
The appellant contended that the issue before the tribunal had already been resolved by the agreement which settled the earlier appeal and that the letter from Customs dated 3 November 1993 accepting the zero-rating of the products amounted to a written agreement for the purposes of Finance Act 1985, s. 25(3) (Value Added Tax Act 1994 section 85 subsec-or-para (3)Value Added Tax Act 1994, s. 85(3)). In any event, the products were zero-rated as food products which did not fall within the excepted items. This was because they would habitually be consumed as part of an overall nutritional strategy for sportsmen, rather than in order to increase body fluid levels, to slake the thirst, to fortify or to give pleasure. The flavouring had been added to make the products palatable and not to render them pleasurable.
The commissioners contended that the 1993 agreement did not amount to an agreement for the purposes of s. 25. No estoppel by convention arose such as to prevent the commissioners from replacing their earlier decision that the supplies were zero-rated by a subsequent ruling that they were standard-rated. On the substantive issue, the products could only be consumed as a drink and had been flavoured to make them palatable and although designed for athletes were "commonly consumed" and were more on the beverage side of the dividing line than the non-beverage side.
Held, allowing the company's appeal:
1. The letter of 3 November 1993 did not amount to a written agreement for the purposes of s. 25. It showed that Customs were agreeable to accepting the products as being zero-rated but it did not, as the section required, confirm the fact that an agreement had been come to.
2. Customs were correct in their submission that there was no common assumption giving rise to an estoppel by convention. All that had happened was that the appellant had accepted the cancellation of Customs' earlier decision that the supplies were standard-rated and replaced by a decision that they were zero-rated. It was the commissioners' duty to review from time-to-time the continuing correctness of a decision and they could not be bound for the future by it.
3. It was clear from Grp. 1, Note (1) that "food" includes drink, so...
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