Weekly VAT News

Innovative Bites Ltd: Mega Marshmallows are not confectionery – UT

The tribunal has once again been asked to rule on the VAT liability of a food product, in particular whether a product is ‘confectionery’ and therefore excluded from zero-rating. Innovative Bites Ltd contended that its product Mega Marshmallows were intended to be roasted over a campfire or barbeque or used as an ingredient in a s’more, and that they were not usually consumed as a snack without roasting. Innovative Bites therefore disputed HMRC’s contention that Mega Marshmallows were confectionery and standard rated for VAT purposes. The First-tier Tribunal agreed with Innovative Bites, concluding that, considering the viewpoint of a typical customer and giving the term ‘confectionery’ its ordinary meaning, Mega Marshmallows were not confectionery and were therefore zero rated. The Upper Tribunal has dismissed HMRC’s appeal against the FTT decision. As a preliminary issue, the UT considered the relationship between Excepted Item 2 (confectionery) and Note 5 of Group 1, Schedule 8, VATA 1994. One of HMRC’s arguments was that Note 5 (which provides that ‘confectionery’ includes certain products) is a deeming provision, which would mean that if a product fell within Note 5, there can be no further findings of fact and hence no multi-factorial assessment. However, the UT considered that there were inconsistencies in HMRC’s arguments on this issue, as HMRC also indicated that in some circumstances a multi-factorial assessment may be required. The UT concluded that Note 5 is not a deeming provision, but is rather an inclusive definition, to clarify potential doubt. A multi-factorial assessment may therefore still be necessary to determine whether a product is confectionery. The UT then concluded that there was no material error of law in the FTT’s analysis and weighing of the relevant factors and evidence. Accordingly, the UT upheld the FTT decision. (Contact: Andrew Roberts)

Transfer of cases from Court of Justice to General Court – CJEU  

As explained on the European Union’s CJEU webpage, the Court of Justice of the European Union is divided into two courts: the Court of Justice, which, as established, deals with requests for preliminary rulings from national courts, and the General Court, which in practice deals with competition law, State aid, trade, agriculture, and trade marks. In March 2024, the Council of the European Union announced its final approval to transfer jurisdiction to give preliminary rulings from the Court of Justice to the General Court in certain specific areas. The areas include the indirect tax matters of VAT, excise duties, the customs code, and tariff classification, also included are compensation issues for transport passengers and the scheme for greenhouse gas emission allowance trading. According to the preamble to the Regulation amending Protocol No 3 on the Statute of the CJEU, the number of preliminary ruling cases and the average time taken to deal with them are increasing. Accordingly, “in the interests of the proper administration of justice” jurisdiction to hear and determine questions referred for a preliminary ruling in the specific areas will be transferred to the General Court. The areas to be transferred must meet the criteria of being “clearly defined and sufficiently separable from other areas” and there must already be a substantial body of Court of Justice case law, which can guide the General Court. Also, there must be a sufficient number of cases to have a real impact on the workload of the Court of Justice. The Council considers that the areas specified meet these criteria. The Court of Justice will retain competence over requests for a preliminary ruling that raise independent questions of interpretation of primary law, public international law, general principles of Union law, or the Charter of Fundamental Rights of the European Union. To give effect to the measure, the Regulation and amended Rules of Procedure of the Court of Justice and of the General Court will be published in coordination, so that all three texts will enter into force at the same time. (Contact: Nicole Faith)

Manage import duties and VAT accounts  – HMRC guidance  

HMRC have published a website Manage your import duties and VAT accounts, which provides a centralised place from which businesses importing goods can manage payment and guarantee accounts, manage and view authorities, and download duty deferment statements, import VAT certificates, postponed import VAT statements, and notification of adjustment statements. The website can only be accessed via the Government Gateway. (Contact: Donna Huggard)

This week’s indirect tax case calendar

On 18 April, the CJEU will deliver judgments in Girelli Alcool on the excise duty treatment of spilled alcohol, M-GbR v Finanzamt O on the VAT treatment of vouchers, and Companhia União de Crédito Popular on the VAT treatment of commission for the sale of pledged goods.

Dbriefs webcast

On 16 April at 12.00, the UK Tax Update – April webcast will be hosted by Daria Adepegba. Our panel will discuss the latest UK tax developments, with updates on news in corporate, employment and indirect tax.

UK CBAM – Insights blog

Nearly three years after the EU first announced the introduction of its new Carbon Border Adjustment Mechanism, the UK government is launching a UK CBAM from 1 January 2027. The new tax will apply to specific carbon-intensive goods within the aluminium, iron and steel, cement, ceramics, fertiliser, glass and hydrogen product groups, and is one of the ways that the UK intends to meet its legally binding net zero 2050 target. In a new Insights blog, we explore what the UK’s new tax will look like, who should be thinking about it, and how will it affect businesses.