THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS v INNOVATIVE BITES LIMITED [2024] UKUT 00095 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | JUDGE PHYLLIS RAMSHAW,JUDGE NICHOLAS ALEKSANDER |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 09 April 2024 |
Neutral Citation: [2024] UKUT 00095 (TCC)
Case Number: UT/2023/000007
UPPER TRIBUNAL
(Tax and Chancery Chamber) Hearing Venue: The Rolls Building,
Fetter Lane, London EC4A 1NL
Value Added Tax, Zero-Rating, Food, Confectionery, Note 5 Item 2 of Group 1 Schedule 8
Value Added Tax Act 1994. Whether Note 5 is a deeming provision – no. Multi-Factorial
Assessment when considering Note 5. Whether FTT erred in concluding Mega Marshmallows
are not confectionery – no.
Heard on: 21 November 2023
Judgment date: 04 April 2024
Before
JUDGE PHYLLIS RAMSHAW
JUDGE NICHOLAS ALEKSANDER
Between
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Appellants
and
INNOVATIVE BITES LIMITED Respondent
Representation:
For the Appellants: Ms Charlotte Brown, Counsel, instructed by the General Counsel and
Solicitor to His Majesty’s Revenue and Customs
For the Respondent: Mr Tim Brown, Counsel, instructed by The VAT Consultancy
1
DECISION
INTRODUCTION
1. This is an appeal by HMRC against the decision of the First Tier Tribunal (Tax Chamber)
(‘the FTT’) released on 21 September 2022 (TC/2019/06287). HMRC were the Respondents
in the appeal before the FTT. In this decision we refer to the Appellants in this appeal as HMRC
and the Respondent as the taxpayer to avoid confusion.
2. The FTT allowed the taxpayer’s appeal against HMRC’s decision that supplies of its food
product ‘Mega Marshmallows’ are standard rated supplies of confectionery pursuant to
Excepted Item 2 of Group 1 of Schedule 8 to the Value Added Tax Act 1994 (‘VATA’). The
conclusion reached by the FTT was that Mega Marshmallows are not confectionery and that
the supply is therefore zero-rated. The conclusion was based on the findings that Mega
Marshmallows are sold and purchased as a product specifically for roasting. The FTT
considered the marketing, the packaging, the size of the product, the positioning in
supermarkets and the seasonal fluctuation in sales when reaching its findings. Permission to
appeal was granted by the Upper Tribunal.
3. References in this decision to paragraph numbers are to paragraphs in the FTT decision
unless otherwise indicated. References to page numbers are to the hearing bundle prepared for
the appeal before us.
BACKGROUND
4. The FTT set out the background very briefly at [2] (the ‘product’ being Mega
Marshmallows):
The appellant is a wholesaler of American sweets and treats, amongst other items. HMRC
decided that the Product was confectionery and ought to have been standard rated. They
issued assessments to the appellant on 14 August 2019, covering supplies of the Product
in VAT periods between June 2015 and June 2019. The assessments total £472,928.
THE ISSUES TO BE DECIDED
5. The primary issue to be decided in this case is whether or not the product, Mega
Marshmallows, falls within Excepted Item 2. This will involve consideration of the
interrelationship between Note 5 and Item 2. As a preliminary issue we need to determine the
legal status and effect of Note 5. This issue arose as a result of submissions made by HMRC
that Note 5 is a deeming provision and the asserted consequences of that submission. Written
submissions from the parties were invited. These were provided after the oral hearing in
accordance with the Upper Tribunal’s directions. We refer to these submissions and the issue
as the ‘legal status and effect of Note 5’.
RELEVANT LEGISLATIVE PROVISIONS
The European Context
6. In this appeal we are concerned with domestic legislative provisions. The supplies subject
to this appeal were made before the United Kingdom left the European Union (‘EU’). Nothing
turns on this for the purpose of this appeal and there is no suggestion that the approach to
interpretation of the relevant provisions has altered. Submissions were made in relation to the
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