Weekly VAT News

DuelFuel Nutrition Ltd: VAT treatment of sports nutrition bars – FTT 

DuelFuel Nutrition Ltd makes twin packs of sports nutrition bars, marketed as a flapjack (to be eaten prior to exercise) and a brownie or cake slice (for recovery following exercise). In the judgment of the First-tier Tribunal, neither of the products qualified for zero-rating as cakes. For historical reasons, HMRC have always accepted that flapjacks can be treated as cakes in certain circumstances, but this approach does not extend to products such as cereal bars or flapjacks with more than minor additions (which typically includes energy or sports nutrition bars), and HMRC therefore ruled that DuelFuel should charge VAT on its products. On appeal, the FTT conducted a multifactorial review of the products’ ingredients, taste and texture, packaging and marketing, and circumstances of consumption, etc. and concluded that they were not cakes, and could not be zero-rated as cakes. The FTT then had to consider whether the products were ‘confectionery’, and concluded that, in the normal sense of the word, they were not. However, it accepted HMRC’s argument that Note 5 (to Group 1, Schedule 8, VATA 1994) deems “sweetened prepared food which is normally eaten with the fingers” to be confectionery so long as it does not produce an absurd result. The FTT rejected DuelFuel’s claim for a more restrictive interpretation, and concluded that the products were confectionery, and therefore subject to VAT at 20%. (Contact: Donna Baker) 

Northern Ireland: distance sales – SI

The Import One Stop Shop (IOSS) and One Stop Shop (OSS) are optional simplified VAT accounting schemes that can be used by Northern Ireland businesses to account for VAT on distance sales transactions. Alternatively, businesses can account for VAT through a normal VAT return. The Value Added Tax (Distance Selling) (Amendments) Regulations 2024 will amend the scope of the IOSS as agreed under the Windsor Framework, so that businesses using the scheme will account for VAT on sales within the UK (including sales between Great Britain and Northern Ireland) on their UK VAT return. The regulations will also align the penalties and interest regime for businesses using the IOSS and OSS schemes with the VAT penalties and interest regime that came into effect in the UK on 1 January 2023. The regulations will come into force on 1 March 2024. No accompanying tax and information note (TIIN) was issued, but the explanatory memorandum to the regulations states that TIINs covering the IOSS/OSS schemes and penalties and interest regime remain an accurate summary of the policies’ impacts. (Contact: Jason Craig) 

Draft alcoholic products excise duty regulations 2024 – Consultation

HMRC have published a technical consultation on the Alcoholic Products (Excise Duty) (Amendment) Regulations 2024. A new alcohol duty system was introduced on 1 August 2023, and the draft regulations relate to administrative details, in particular approvals, returns, and payments. The regulations will provide for a single digital approval process and digital returns to harmonise alcohol duty authorisations and accounting processes. A digital service for making returns and payments “is expected to launch on 1 March 2025”. As part of the harmonisation, the regulations will standardise alcohol duty return periods, and filing and payment dates. The technical consultation is seeking to gather feedback from stakeholders to ensure the regulations deliver the policy as intended. The consultation will close on 18 March 2024. (Contact: Eleanor Caine)

This week’s VAT case calendar

On 14 February, the Upper Tribunal will hear the taxpayer’s appeal against the First-tier Tribunal decision in Silverdoor Limited on VAT on recharges of merchant acquirer costs.