Revenue and Customs Brief 6 (2021) VAT liability of juice cleanse programmes
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Published 17 May 2021
Purpose of this brief
This brief clarifies HMRC’s policy concerning the VAT
treatment of supplies of juice cleanse programmes following the Upper
Tribunal case involving The Core (Swindon) Ltd UT/2019/0049 (‘The
Core’).
The issue in this case was whether the sale of juice cleanse
programmes were standard-rated beverages or zero-rated meal
replacements.
Who needs to read this
Businesses that sell juice cleanse programmes and their advisers.
VAT liability background
Supplies of most food and some drinks are zero-rated under UK
legislation (the relevant provisions can be found in Group 1 of
Schedule 8 to the Value Added Tax Act 1994).
Beverages
The legislation standard rates ‘beverages’ (including
fruit juices). While most drinks are beverages, some drinkable liquids
(for example some liquid foods) are not beverages and are zero-rated
for VAT purposes.
Generally, HMRC decides whether a drink is a beverage by reference
to the characteristics set out by the Tribunal in Bioconcepts Ltd
versus HMRC (1993) (‘Bioconcepts’). Therefore a drink will
be a beverage if it is commonly consumed and characteristically taken
for one or more of the following purposes:
- to increase bodily liquid levels
- to satisfy thirst
- to fortify
- consumed to give pleasure
However, the High Court in Kalron Foods (2007 EWHC 695 (Ch)) pointed
out that this guidance is unlikely to be exhaustive (see how to determine whether a drink is a beverage ).
Meal replacements
HMRC accepts that products designed specifically as complete meal
replacements (and so provide users with the necessary calories and
nutrients of a meal) can be zero-rated. These include meal replacements
in liquid form to be used as part of a slimmer’s diet and certain
products to promote weight gain in convalescence. Such products are
normally regulated by legislation and may be given under medical
supervision or on prescription.
Litigation in The Core
The Core operates a juice bar which offers juice cleanse programmes
comprising fresh drinks made by juicing raw fruits and vegetables. The
programme is based on the consumption of 4 × 500 millilitre
bottles of juices and smoothies per day and is run over a number of
days – for example, a customer might undertake a 5-day juice
cleanse programmes whereby meals are replaced by 4 juice cleanse
programme juices and smoothies each day.
The First-tier Tribunal
decision
Based mainly on the fact that the juice cleanse programmes were
marketed as meal replacements, the evidence of 2 of its customers and
the testimonials on The Core’s website, the First-tier Tribunal
found that the juice cleanse programmes were generally purchased as
meal replacements and not as beverages, and so were zero-rated.
HMRC had concerns about the significance of the weight attached to
the way in which the juice cleanse programmes were marketed as meal
replacements, without testing the credibility of those claims.
No expert witness evidence was heard by the Tribunal, but on the NHS
website for nutritional advice on ‘Water,
drinks and your health’
https://www.nhs.uk/live-well/eat-well/water-drinks-nutrition/ states
that a 150 millilitre glass of unsweetened fruit juice, vegetable juice
or smoothie can only count as a maximum of 1 portion of your
recommended 5 daily portions of fruit and vegetables.
It goes on to advise people not to exceed this amount – this
compares to The Core’s recommended intake of 2,000 millilitre of
such drinks each day as part of its juice cleanse programmes.
HMRC therefore appealed the First-tier Tribunal decision to the
Upper Tribunal.
The Upper Tribunal decision
While the Upper Tribunal did not overturn the First-tier Tribunal
decision, it did confirm that in all cases involving classification for
VAT purposes it is necessary to carry out a multifactorial assessment
(that is to consider all of the relevant facts – see how to determine whether a drink is a beverage).
As part of that assessment, the way in which a product is marketed
is potentially relevant in every case – in some cases, it will
carry very little weight and in other cases, it may carry great weight.
The ‘amount’ of weight to be attributed to marketing is
case specific. The Upper Tribunal has therefore endorsed a fact
specific stance rather than the more expansive approach taken by the
First-tier Tribunal.
This is consistent with HMRC’s approach to such cases. Since
the decision in this case was based on the specific facts found by the
Tribunal, HMRC has decided not to appeal the Upper Tribunal decision.
However, going forward each case must be decided on its own facts.
How to determine whether a drink is a beverage
In many cases it will be clear whether a drink is a beverage by
reference to the characteristics set out in Bioconcepts. However in
some less-straight-forward cases, it will be necessary to go on to
conduct a more detailed multifactorial assessment, which is likely to
include consideration of:
- how the drink is held out for sale – for example how it is
labelled, packaged, displayed, invoiced, advertised and marketed
- circumstances of consumption – for example why it is
consumed and when it is consumed
- taste and texture
- ingredients
- manufacturing process
For information about the VAT treatment of drinks see section 3.7 of Food products (VAT Notice 701/14)
and VFOOD7520 of the HMRC Internal Manual.
For information about meal replacements read VFOOD2700
and VFOOD7780 of the HMRC Internal
Manual.
About the Author
© Crown Copyright 2021.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2021-05-17 22:57:52 in Tax Articles
