​A Sticky Situation: Morrisons vs. HMRC in VAT Debate

​A Sticky Situation: Morrisons vs. HMRC in VAT Debate

Posted by Emily on 14th Apr 2024

The ongoing debate over VAT on snack bars has taken a new twist as the First Tier Tribunal (FTT) revisits the case between Morrisons and HMRC. This legal battle focuses on whether certain snack bars, including products from brands Organix and Nakd, should be classified as confectionery for VAT purposes.

Image Source & Copyright: https://www.eatnakd.com/

The heart of the dispute is whether these 20 snack bar varieties featuring ingredients like dried fruits, nuts, and oats fall under the "confectionery." The products in question range from the Carrot Cake Soft Oaty Bar to the Banana Bread Bar and the Berry Bliss Bar.

The case has seen its share of legal back and forth. Initially, the FTT ruled these products as confectionery in 2021, but the decision was overturned by the Upper Tribunal (UT) in 2023, leading to a reevaluation by the FTT. Notably, the FTT was allowed to taste the products themselves despite restrictions on new evidence.

At the heart of the VAT law, food for human consumption generally enjoys a zero rate. However, confectionery is an exception unless it's classified as cakes or biscuits. The FTT broadened the definition of confectionery to include products mixed or compounded to taste sweet and typically consumed with the fingers in small quantities.

Image Source & Copyright: https://www.organix.com/

Despite Morrisons' argument that these snack bars are not traditional confectionery, the FTT found their sweet, sticky nature and chewy texture akin to confectionery products like nougat and fudge. The Tribunal also considered the products' marketing strategies and placement in stores, ultimately deciding these factors did not influence their classification as confectionery.

Morrisons' attempt to categorise the snack bars as cakes, citing marketing language, was quickly dismissed. The Tribunal quoted Judge Anne Fairpo's remark that "nominative determinism is not a characteristic of snack foods," underscoring that naming a product a cake does not change its nature.

The implications of this VAT debate extend beyond the courtroom, affecting both consumers and retailers. We invite you to share your thoughts and opinions on this matter. How do you view the classification of such snack bars, and what impact do you think this ruling will have on the industry? Leave your comments below.

Main Image Source & Copyright: https://www.organix.com/