Innocent loses battle against VAT ruling

Smoothies regarded as beverages by HMRC

British smoothie manufacturer, Innocent, has lost its tribunal case against Her Majesty’s Revenue and Customs (HMRC) on exemption from paying VAT on its smoothies, it has been reported.

Innocent has claimed the VAT charges placed on its smoothies are unfair, given that the government charges 17.5% VAT on Innocent’s 100% fruit juice smoothies, when the raw fruit ingredients are tax free.

The company, which is partially owned by Coca-Cola, began the tax bill dispute in April 2007, when it tried to claim back the VAT charged on each bottle of fruit smoothie it had sold over a three year period, arguing smoothies are a “liquefied fruit salad” and not just a beverage.

Under the UK’s tax rules, consumers pay no VAT on everyday foods and drinks, but are required to pay 17.5% on “luxury” items.

HRMC came to the decision that smoothies should be considered a beverage and charged the full 17.5% VAT, despite Innocent’s argument that its smoothies provided two of the recommended five a day portions of fruit and vegetables.

Founder and chief executive of Innocent, Richard Reed told The Guardian: “This ruling is definitely not in the interest of the nation’s health. It’s absurd that smoothies, which contain two portions of fruit and help people live more healthily, are subject to VAT at full rate when junk food like burgers, chips and doughnuts are sold tax free.”

However, HMRC newly published judgement states: “The question for the Tribunal is whether the smoothies are a beverage. The Appellant’s case is that fruit smoothies are merely a liquid food and not a beverage: HMRC considers them to be a beverage.”

© Crimson Business Ltd. 2010

 

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