Nestle Lose Case on Zero Rates Products

Nestle has lost a case in the Upper Tribunal over the VAT treatment of its Strawberry and Banana-flavoured Nesquick Powders. The Appeal was brought by Nestle against an original 2016 ruling by the FTT. This case is one of many appeals relating to foodstuffs and the application of zero rating. It shows just how complex the VAT treatment of foodstuff is. The composition of food and drink products is key to determining whether they qualify for zero rating.

Nestle had requested a £4m repayment from HMRC for the standard-rate VAT it claimed to have over-declared on the supply of it Nesqick products.

HMRC and Nestle agree that the chocolate-flavoured Nesquik is subject to the zero-rated food.

Despite the strawberry and banana Nesquik products being very similar, the tribunal found them to fall within the excepted items for zero rating because they are a powder for the preparation of beverages. This means they should be treated as standard-rated.

Nestle argued that its strawberry and banana flavoured Nesquik products should be zero-rated because they encourage milk drinking and milk is zero-rated. It also said that the chocolate and fruit products should be treated the same for VAT purposes because they are, essentially, the same. Therefore, not to give equal treatment would result in a fiscal neutrality breach. However, the tribunal rejected both arguments, siding with HMRC and confirming that the strawberry and banana products should be standard-rated.

Source: KS Weekly VAT Updated.

Kingston Smith LLP

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