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Tribunal win prompts HMRC to change guidance on VAT

In January 2018, Schofield Sweeney’s litigation team, led by Partner Richard Stockdale, 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).

Further to this ruling, HM Revenue and Customs have now changed its guidance relating to VAT on their website.

HMRC 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.

Following the two-day trial, the judge ruled that when Bicarbonate of Soda is produced in a form that is primarily intended as a baking ingredient, then it would be classified as a "food of a kind used for human consumption" and therefore falls within item 1 Group 1 Schedule 8 VATA which qualifies for zero rated for VAT. The ruling meant that Phoenix Foods Limited avoided a £305,000 VAT bill and the outcome will be of huge interest to those in the food retail, wholesale and manufacturing industry.

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.

Further details can be found at:

https://www.gov.uk/government/publications/revenue-and-customs-brief-8-2018-vat-liability-of-bicarbonate-of-soda/revenue-and-customs-brief-8-2018-vat-liability-of-bicarbonate-of-soda

Our Complex Litigation team would love to talk to you about your requirements. Please call us on 0113 849 4000.

 

About the Author

Richard Stockdale

Partner

Richard has over 30 years experience of general commercial litigation including breach of contract,…

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