WM Morrisons Supermarket PLC v The Commissioners for HM Revenue and Customs [2023] UKUT 00020 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Upper Tribunal Judge Swami Raghavan,Tribunal Judge Guy Brannan |
| Neutral Citation | [2023] UKUT 00020 (TCC) |
| Subject Matter | 23 January 2023 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 24 January 2023 |
Neutral Citation: [2023] UKUT 00020 (TCC) Case Number: UT/2021/000148
UPPER TRIBUNAL
(Tax and Chancery Chamber) By remote video hearing
VAT – whether certain Organix and Nakd bar products fell within exception to zero-rating as
“confectionery” in Item 2 of Group 1 of Schedule 8 of VATA 1994 - relevant test regarding
error of law where allegation tribunal failed to take account of relevant factor – whether
necessary to show FTT perverse in failing to take account of factor- no – whether FTT erred
in ruling out of consideration healthiness, and comparison of ingredients in traditional
confectionery on basis of case-law (High Court decisions in Kalron and Premier Foods) – yes
–whether errors material applying test set out by Court of Appeal in Degorce- yes- appeal
remitted to FTT for new decision
Heard on: 14 December 2022
Judgment date: 23 January 2023
Before
JUDGE SWAMI RAGHAVAN
JUDGE GUY BRANNAN
Between
WM MORRISON SUPERMARKETS PLC Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Valentina Sloane KC, Counsel, instructed by Deloitte LLP
For the Respondents: Howard Watkinson, Counsel, instructed by the General Counsel and
Solicitor to His Majesty’s Revenue and Customs
1
DECISION
INTRODUCTION
1. The appellant, the well-known supermarket, Morrisons, (“Morrisons”) appeals against
a decision of the First-tier Tribunal (“FTT Decision”) published as WM Morrison
Supermarkets PLC v HMRC [2021] UKFTT 106 (TC). The FTT rejected Morrisons’ argument
that certain products it sold (Organix Bars and Nakd Bars) were zero-rated as “food of a kind
used for human consumption” (under Group 1 Schedule 8 Value Added Tax Act 1994 (“VATA
1994”). Instead, the FTT agreed with HMRC that the products fell within the exception the
legislation provided to the zero-rating of such food for “confectionery in Item 2 of Group 1 of
Schedule 8 of VATA 1994.
2. Although Morrisons’ position was that the Organix and Nakd bars were zero-rated, it
had, when it sold the products on to customers, accounted to HMRC for standard rate VAT at
20%. It thus sought repayment of that output VAT (just over £1 million in relation to the Nakd
bars in the period October 2014 to July 2018 and £97,000 in relation to Organix bars in the
period October 2013 to July 2017).
3. The FTT upheld HMRC’s decisions that the products bore standard rate VAT and also
HMRC’s refusal to repay the amounts in respect of output VAT Morrisons sought. With the
permission of the Upper Tribunal, Morrisons now appeals to the Upper Tribunal against the
FTT’s Decision on the grounds the FTT, in analysing whether the products were
“confectionery” wrongly treated certain factors as irrelevant, namely: (1) (i) the actual or
perceived healthiness of the products and/or (ii) the products’ marketing as such (2) the absence
of cane sugar, butter and flour (being ingredients associated with traditional confectionery).
LEGISLATION
4. Section 30(2) VATA 1994 provides for zero-rating of goods described within Schedule
8, Group 1 of which includes “Food of a kind used for human consumption”, along with a list
of excepted items and interpretative notes. Item 2 is the relevant exception for the purposes of
this appeal. This excepts from zero-rating:
“Confectionery, not including cakes or biscuits other than biscuits wholly or
partly covered with chocolate or some product similar in taste and
appearance”.
5. Note 5 to the list of excepted items provides:
“for the purposes of item 2 of the excepted items ‘confectionery’ includes
chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any
item of sweetened prepared food which is normally eaten with the fingers”.
FTT DECISION
6. Unless otherwise stated paragraph references are to those in the FTT decision. The
relevant products Morrisons sold were two different types of bars manufactured by Organix
(Organix Carrot Cake Soft Oaty bar, Organix Banana Soft Oaty bar) and 18 types of bars
manufactured by Nakd (listed in full at [12] to [15]) which could be broken down in the
following three categories: (1) “Fruit and Nut bars” (such as “Nakd Cashew Cookie Wholefood
Bar” and “Nakd Cocoa Orange Wholefood Bar”, (2) “Oaties” (such as “Nakd Apple Pie
Wholefood Bar” and “Nakd Banana Bread Wholefood Bar”) and (3) “Crunchies” (“Nakd
Banana Crunch Wholefood Bar” and “Nakd Strawberry Crunch Wholefood Bar” ).
7. The FTT concluded all were “confectionery”. They therefore fell within the exception to
zero-rating and thus were standard-rated for VAT purposes. The FTT went on to consider, and
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