FTT examines juicy VAT case

Newsletter issue - February 2019.

The First Tier Tribunal (FTT) were recently called upon to examine whether fruit and vegetable juices sold as meal replacements were beverages and therefore standard-rated for VAT.

The case (The Core (Swindon) Ltd [2019] TC 06874) concerned a juice bar and health cafÃ© which supplied juice cleanse programmes (JCPs) consisting of fresh drinkable products made from juicing raw fruits and vegetables. Customers would participate in a programme over multiple days, for example a 5-day programme might be taken where meals were replaced by JCP juices and smoothies for five days with four servings per day. The marketing material showed that the JCPs were marketed as meal replacement programmes and not merely as healthy drinks.

In HMRC's opinion, standard-rating applied for VAT purposes, but The Core argued that what was important was what the consumer actually sees, which was more than just some drinks. They were marketed and sold totally differently. In addition, customers were provided with advice and encouragement, as well as the menu plan.

The FTT was called upon to decide whether the JCP product was a beverage within excepted item 4 of VATA 1994, Sch 8, Grp 1, and in doing so, it needed to make a multi-factorial assessment looking at:

how the product was marketed;
why it was consumed by the customer; and
what was the use to which it was put?

Overall, the key difference in this case compared to other cases cited at the Tribunal was that the product was specifically sold by The Core, and bought by its customers, as a meal replacement, and not as a beverage. Moreover, the JCPs were not marketed as beverages, but as meal replacements in liquid form. Although the JCPs appeared to be a kind of 'smoothie', they had a different function and so were regarded as a food.

The Tribunal was therefore able to allow the appeal and zero-rating applied to the JCPs.

In summary, this case was particularly interesting as it demonstrated how the FTT needed to look at many layers of information before being able to make their determination of the facts.