Weekly VAT News

Innovative Bites Ltd: Are Mega Marshmallows confectionery? CA

 The Court of Appeal has been asked to rule on whether a food 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. HMRC were of the view that Mega Marshmallows were confectionery and standard rated for VAT purposes. At the First-tier Tribunal and Upper Tribunal, Innovative Bites were successful: considering the viewpoint of a typical customer and giving the term ‘confectionery’ its ordinary meaning, they were not confectionery and were therefore zero rated. The UT disagreed with HMRC’s assertion that Note 5 of Group 1, Schedule 8, VATA 1994 (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 it is confectionery for the purposes of Item 2. Rather, the UT held that Note 5 is “akin to a rebuttable presumption” and an inclusive definition to clarify potential doubt, and a multi-factorial assessment may therefore still be necessary. However, in its judgment, the CA has allowed HMRC’s appeal and remitted the case to the FTT. In the CA’s view what Parliament has said about the significance of Note 5 was unambiguous: Note 5 is conclusive, and absent absurdity, products of the types described in Note 5, including “sweetened prepared food which is normally eaten with the fingers”, are confectionery for the purposes of Item 2. In remitting the matter back to a differently constituted FTT, the burden will lie with the taxpayer to prove that the product is not normally eaten with the fingers (a question of fact on which the FTT has not made a finding), or indeed, not confectionery as understood by an ordinary person. (Contact: Andrew Roberts)

Arrangements for sending parcels from Great Britain to Northern Ireland

The Windsor Framework established a new set of arrangements for sending parcels from Great Britain to Northern Ireland, which were to come into effect from 30 September 2024, but were postponed. HMRC have now announced that the new arrangements will take effect from 1 May 2025. The arrangements will depend upon the type of parcel and on whether the parcel is being sent by a business or an individual. Parcel carriers authorised under the UK Carrier Scheme can move eligible consumer parcels from GB to NI without completing customs or safety and security declarations. Eligible parcels sent from a business in GB to a business in NI can be moved under the simplified processes for Internal Market Movements, meaning that they do not require a full customs declaration and no customs duty would be charged. (Contact: Donna Hemphill)

Customs duty classification of mobility scooters – pre- and post-Brexit periods

In 2020, the Court of Appeal held in Invamed Group Ltd & Ors that mobility scooters were vehicles for the disabled, and accordingly duty free. This decision applied to scooters imported into the UK between 2004 and 2007. Following a 2009 EU regulation, HMRC considered that the mobility scooters were not duty free. In 2024, the First-tier Tribunal disagreed with HMRC in Electric Mobility Euro Limited & Anor (EMEL), and HMRC have been granted leave to appeal to the Upper Tribunal. Following the end of the Brexit implementation period (31 December 2020), there were no UK-specific regulations dealing with mobility scooters until 25 October 2021. A number of appeals have been made relating to both pre-Brexit and post-Brexit importations of mobility scooters, and HMRC have applied to stay these appeals behind EMEL. In a decision released last week, the FTT has held that the appeals relating to pre-Brexit importations should be stayed behind EMEL. However, the post-Brexit importations should proceed to a hearing. (Contact: Jeffrie Mann)

Extended producer responsibility for packaging scheme – data due by 1 April 2025

The Department for Environment, Food & Rural Affairs has reminded businesses that 2024 packaging data under the new extended producer responsibility for packaging (EPR) scheme must be submitted by 1 April 2025. Large organisations must submit data for the period from July to December 2024. Small organisations must submit their data for the period from January to December 2024. Large organisations are those with annual turnover of £2 million or more and supplying or importing more than 50 tonnes of packaging in the UK. Small organisations are those with annual turnover between £1 million and £2 million and supplying or importing more than 25 tonnes of packaging in the UK, or with annual turnover over £1 million and supplying or importing between 25 tonnes and 50 tonnes of packaging in the UK. Also by 1 April, impacted organisations must have registered with their respective environmental regulator. The data provided will be used to set the fees payable under the scheme. EPR fees were deferred for a year and are due to come into effect later this year. EPR is intended to “move the cost of dealing with household packaging waste away from taxpayers onto the businesses who produce the packaging”, incentivising businesses to reduce packaging and use more recycled and recyclable packaging. (Contact: Ellie Newey)

Spring Statement 2025 and Dbriefs webcast

The Chancellor of the Exchequer, Rachel Reeves, will present her Spring Statement on Wednesday, 26 March 2025, together with the Office for Budget Responsibility’s Economic and Fiscal Forecast. For insights on the announcements, please visit our Spring Statement 2025 page. There will be a Dbriefs webcast on Thursday 27 March at 15.00, hosted by Amanda Tickel, Deloitte’s Global Head of Tax and Trade Policy, during which our presenters will provide an update on the previous day’s announcements and their implications for businesses and individuals.