Westland Horticulture Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 July 2019 |
| Neutral Citation | [2019] UKFTT 480 (TC) |
| Date | 25 July 2019 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 480 (TC)
Judge Richard Chapman QC, Miss Susan Stott
Mr Geoff Tack, Solicitor, appeared for the appellant
Mr Daniel Baird, Presenting Officer, of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
Value added tax – VATA 94, s. 30(2) and Sch. 8, Grp. 1– Zero rating – Whether a lawn repair product is seed for growing grass for animal feed – No – Product standard rated – Appeal dismissed.
The FTT dismissed an appeal by a company which argued that its lawn repair product should be zero-rated as animal feed because it contained generic grass seed. Generic grass seed is zero rated when sold on its own because the grass which grows is used as animal feed, this is the case even if the seed is sold in garden centres for use on domestic lawns. The FTT held that the lawn repair product was standard rated because it was marketed for use on domestic lawns.
The appellant sold a lawn repair product which was promoted for use on domestic lawns to treat patches which have been created by, e.g wear in high traffic areas, shade under trees, pet urine, children playing etc.
The product contains generic grass seed as well as a sewing medium containing nutrients and Clinoptolite (a product which neutralises the effect of pet urine on the germinating seeds). Generic grass seed is the majority component and generic grass seed is zero rated when sold on its own because the grass which grows from it can be used as animal feed.
The FTT based its decision on the way in which the product was marketed and promoted. It ruled that the product did not qualify for zero-rating because:
- it was marketed for domestic use on lawns and not held out in any way to be for the purpose of animal feed (para. 36)
- its intended use is on lawns and not for animal feed (para. 37); and
- the capacity for the grass grown to be animal feed is not determinative and is emphatically overridden by the fact that the Product is held out for domestic use on lawns (para. 38).
Although Westland Horticulture's view is understandable, the FTT was clear that it had approached the issue of VAT liability from the wrong angle. The fact that a product can be eaten is not sufficient for it to fall within the zero-rating provisions covering foodstuffs. The FTT referred to related cases including Fluff Ltd (t/a Mag-it) v C & E Commrs [2001] BVC 489 in which, at para. 17, the judge remarked that straw boaters are not zero rated animal feed despite the fact that animals can eat them and obtain nutritional benefit from so doing.
[1] This is an appeal against HMRC's decision to disallow the zero-rating of a product known as “Aftercut Patch Fix” (“the Product”), manufactured and supplied by the Appellant, Westland Horticulture Limited (“Westland”). It is common ground that the Product constitutes a single composite supply rather than multiple supplies. The question which we have to resolve is whether or not the Product constitutes, “seeds or other means of propagation of plants comprised in animal feeding stuffs” for the purposes of Item 3, Group 1 of Schedule 8 to the Value Added Tax Act 1994 (“VATA 1994”). We treat the following as shorthand for this question: is the Product seed for growing grass for animal feed? If the answer is “Yes”, the Product is to be zero-rated. If the answer is “No”, the Product is to be standard rated. For the reasons which we set out below, our answer is “No”.
[2] There were no significant disputes of fact. We heard evidence from Officer James Girvan (the decision making officer) on behalf of HMRC and Mr Mark Hamill (Westland's head of technical matters) on behalf of Westland. Both witnesses gave evidence in an honest, helpful and credible manner, and we accept their evidence insofar as it related to facts rather than opinion or submissions. In those circumstances, we make the following findings of fact.
[3] Westland carries on business in the manufacture and supply of a range of horticultural products. These include gardening products, lawn treatments, lawn seed, plant food, fungicides and weed killers. Sales are made through retailers and also directly to the general public.
[4] In essence, the Product is a grass seed mixed with a combination of additional materials which promote the growth of the seed. The constituent parts of the Product are grass seed, seed sowing granules, Clinoptilolite and water. The grass seed is of various varieties and is not in itself any different to “ordinary” grass seed sold without any additives. The seed within the Product was referred to by the parties as being tough grass seed blend, which comprises perennial rye grass seed or chewings or fine fescues. The seed sowing granules consist of organic matter. Clinoptilolite is a chemical which helps neutralise the effects of excess salts and ammonia. Mr Hamill's evidence (which we accept) is that the use of Clinoptilolite is marketed by Westland as being a “pet urine neutraliser”, although he notes that the chemical is an approved feed additive popular for use with dairy and beef herds to aid cows' digestion systems and to improve their overall health and well-being. It can be used in a similar way for other animals.
[5] When using grass seed alone, the ground needs to be cultivated to protect the seed and to promote germination. The only difference between using grass seed in the ordinary course (“Generic Grass Seed”) and using the Product is that the other materials within the Product carry out this protection and promotion and so the Product provides a means of achieving the planting, cultivation and germination in one application on unprepared land.
[6] The Product's key purpose is (as the name suggests) to fill in patches of lawn where grass has not grown properly or has become damaged. In principle, however, the Product could be used on wider areas wherever grass is required and so is not restricted to patches of lawns. The seed is carefully selected with what Mr Hamill said was the primary aim of producing a full, healthy, thick and vibrant sward of grass post-application in areas where there had been no grass.
[7] The Product is advertised on Westland's website, which includes the following relevant details.
Aftercut Patch Fix is a unique blend of grass seed, feed and seeding soil designed to fix patches in your lawn quickly and easily.
It is a 2 in 1 solution that treats both worn areas and dog spots
- Grass Seed, feed & seeding soil blend
- Repairs worn areas and patches
- Fix dog spots with pet urine neutraliser
- Children and pet safe
- Ideal for play areas and shady areas
…
New grass will establish in the treated areas.
…
Patch Fix contains a special ingredient which absorbs the harmful salts and ammonia produced when pet urine breaks down, helping grass to re-establish where it would otherwise fail. Even better, Patch Fix also contains pet urine resistant grass seed varieties.
…
Where to Use:
- In high traffic areas where lawn is worn away
- Shady conditions, such as under trees
- In patches caused by pet urine
- In and around children's play areas, such as trampolines
…
Frequently asked questions
…
Q. Could I use Patch Fix to cover large areas or bare lawns?
A. Patch fix is ideal for all patches that are approx. 45cm in diameter. For larger areas we recommend some lawn seeding soil and some fresh lawn seed.
[8] We were shown boxes of the Product and were therefore able to consider the packaging in detail. The words “Total Lawn Repair” are prominent beneath the Product's name. It is clear that it is suggesting domestic use as the only animals on the packaging are dogs, there is an emphasis upon pets and the fact that it is “Children and Pet Safe” is highlighted. The box also includes the following information (repeating the substance – and in some respects the wording – of the website entry set out above):
Aftercut Patch Fix is a unique blend of grass seed, feed and seeding soil designed to fix patches in your lawn quickly and easily.
…
Neutralises harmful salts from pet urine.
Specially selected vigorous grass varieties.
Granulated growing media for moisture retention.
Added organic matter for better root establishment.
…
Children and pets need not be excluded from treated areas.
…
Comprising a mixture of 90% base material and 10% grass seed.
[9] Mr Hamill informed us that the Product is sold in gardening stores and DIY retailers on the same shelves as Generic Grass Seed and also other patch repair products from competitors. Similarly, the search term “grass” on Amazon's website provides both Generic Grass Seed and path repair products. This was not challenged and we accept it.
[10] In the course of correspondence between Westland and HMRC, Westland provided HMRC with a bill of materials (“the First Bill”) setting out the percentage costs of the constituent parts of the Product as follows: 42% grass seed, 36% seed sowing granules, 4% Clinoptilolite and 18% packaging. The constituent parts by weight for a 4.8kg box (the box itself adding a further 0.27kg) were as follows: 0.48kg grass seed, 4.08kg seed sowing granules, and 0.24kg Clinoptilolite.
[11] Westland later informed HMRC that the First Bill was incorrect and provided a second bill of materials (“the Second Bill”). The Second Bill provided that the percentage costs of the constituent parts of the Product were as follows: 92.3% grass seed, 6.4% seed sowing granules, 0.2% water and 1.1% Clinoptilolite. The constituent parts by weight (again for a 4.8kg box excluding the weight of the box itself) were similar to the First Bill and were as follows: 0.43kg grass seed, 3.624kg seed sowing granules, 0.72kg water and 0.024kg Clinoptilolite.
[12] Westland maintained that the First Bill was inaccurate because it was based upon an experimental formulation of the Product, did not take into account revised production methods and relied upon budgeted costs,...
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