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Schofield Sweeney’s litigation team, led by Partner Richard Stockdale, has successfully won a highly complex case relating to the VAT rating of Bicarbonate of Soda on behalf of Phoenix Foods Limited (part of the Premier Foods Group).
HM Revenue and Customs brought a claim against Phoenix Foods Limited stating that the company owed £305,000 in VAT due to the classification of Bicarbonate of Soda as ‘a food not used for human consumption’. This was opposed by Phoenix Foods Limited who sought legal advice from Richard Stockdale.
The ruling means that Phoenix Foods Limited has avoided a £305,000 VAT bill and the outcome will be of huge interest to those in the food retail, wholesale and manufacturing industry. The decision avoids HMRC making retrospective claims worth many millions of pounds against companies in the food industry in relation to supplies over the last six years. Although the case concerned bicarbonate of soda it applies equally to all other products (whether ingredients or foods in their own right) which are properly classed, on a common sense test, as being food of a kind used for human consumption.
The claim was made by HM Revenue and Customs as they believed that Bicarbonate of Soda was not a "food of a kind used for human consumption" which qualifies for a zero rate of VAT (under item 1 Group 1 Schedule 9 VATA), and so believed that Phoenix Foods Ltd was required to pay VAT and had accrued liabilities of £305,000.
The decision was made by the Judge in January following a two day hearing in October 2017, that the supply of Bicarbonate of Soda by Phoenix, in a form that was primarily intended as a baking ingredient was a supply of "food of a kind used for human consumption" and therefore this falls within item 1 Group 1 Schedule 8 VATA which qualifies for zero rated for VAT.
“This was a very significant test case for the food industry raising issues as to what is to be regarded as food (rather than an additive) and also issues regarding HMRC’s approach in rating products differently according to their intended use.” Richard Stockdale, Partner, Schofield Sweeney