HM Revenue v The Core (SWINDON) Limited, Upper Tribunal (Tax and Chancery Chamber), Judgment, Law, casemine.com

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HM Revenue v. The Core (SWINDON) Limited

Smart Summary

Factual and Procedural Background

This opinion concerns an appeal from the First-tier Tribunal (Tax Chamber) ("FTT") decision released on 17 December 2018. The FTT had allowed the appeal of the Respondent, Company A, against HM Revenue and Customs ("HMRC"), ruling that Company A's Juice Cleanse Programmes ("JCPs") should be zero-rated as supplies of food rather than standard rated as supplies of beverages for VAT purposes. HMRC appealed this decision to the Upper Tribunal. Company A operates a juice bar offering JCPs consisting of fresh drinkable products made from juicing raw fruits and vegetables. The FTT accepted Company A's contention that the JCPs were not "beverages" under the relevant VAT legislation and thus should be zero-rated. HMRC challenged this on the ground that the FTT erred in law by allowing the marketing of the JCPs to dictate their VAT classification.

Legal Issues Presented

Whether the FTT erred in law in concluding that the Juice Cleanse Programmes were not "beverages" for the purposes of Schedule 8 of the Value Added Tax Act 1994 ("VATA").
Whether the FTT improperly allowed the marketing and purchase of the JCPs as meal replacements to determine their VAT classification rather than applying an objective multi-factorial assessment.

Arguments of the Parties

Appellants' Arguments (HMRC)

The FTT gave undue weight to the way the JCPs were marketed and held out for sale.
The FTT placed excessive emphasis on the finding that the JCPs were meal substitutes based primarily on their marketing as meal replacements.
The FTT treated the "Bioconcepts" tests as definitive in determining whether the JCPs were beverages.
The JCPs should be classified as beverages under VAT law regardless of their marketing.

Respondent's Arguments (Company A)

The JCPs are properly classified as zero-rated food because they function as meal replacements, not beverages.
The multi-factorial assessment, including marketing, consumption, and use, supports the classification of JCPs as food.
The FTT correctly applied relevant legal principles and case law in its decision.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
HMRC v Procter & Gamble [2009] EWCA Civ 407	Multi-factorial assessment required for VAT classification questions; appellate court slow to interfere absent legal error.	Confirmed the FTT's approach to multi-factorial assessment and deferential review of factual findings.
Bioconcepts Ltd v HMRC [1993] Lexis Citation 1149	Definition of "beverage" as a commonly consumed liquid drink taken to increase bodily fluid, slake thirst, fortify, or give pleasure.	Adopted as a key test for determining whether a product is a beverage; FTT applied these criteria in analysis.
Innocent Limited v HMRC [2010] UKFTT 516 (TC)	Consideration of whether a product would be offered to an unexpected guest as a test for beverage classification.	FTT used this "unexpected guest" test to support conclusion that JCPs were not beverages.
Kalron Foods Ltd v HMRC [2007] EWHC 695 (Ch)	Classification of a product as beverage or food depends on characteristics and consumption context; absence of evidence on consumption can affect outcome.	Distinguished from current case; JCPs were consumed as meal replacements unlike Kalron products.
CCE v Ferrero UK Limited [1997] STC 881	Warning against elevating factual authorities into principles; classification depends on how product is held out for sale.	Supported the approach that marketing and manner of supply are relevant factors in classification.
Fluff Ltd (t/a Mag-it) v C & E Commissioners [2001] STC 674	Classification depends largely on how a product is supplied; dual use products assessed by predominant use.	Used to support that marketing and supply context are relevant in classification.
Kinnerton Confectionery Limited v HMRC [2018] UKFTT 0382 (TC)	Classification depends on how product is objectively held out for sale assessed via multi-factorial approach.	Supported the FTT’s approach in considering marketing as one relevant factor.

Court's Reasoning and Analysis

The Upper Tribunal emphasized that the scope of the appeal was limited to legal errors in the FTT's approach, not its factual findings or multi-factorial assessment. The Tribunal rejected the Appellants' argument that the FTT gave undue weight to marketing, explaining that the FTT considered three factors equally: how the product was marketed, why it was consumed, and the use to which it was put. The FTT found that purchasers bought the JCPs as meal replacements, not beverages, supported by evidence including customer testimony and product characteristics.

The Tribunal rejected the distinction between "single use" and "dual use" products urged by the Appellants, noting that the JCPs could be used as beverages or meal replacements, and that marketing and consumption context are relevant in all VAT classification cases. The Tribunal found no error in the FTT's application of the Bioconcepts criteria, which were expressly not treated as exhaustive by the FTT. The FTT also correctly applied the "unexpected guest" test from Innocent Limited and distinguished the facts from Kalron Foods Ltd, where the product was consumed as a beverage.

The Tribunal held that the FTT conducted a proper multi-factorial assessment, weighing all relevant factors including marketing, consumption, ingredients, shelf life, texture, and use. It concluded that the FTT's decision was neither plainly wrong nor irrational and that no legal error had been made in law or principle.

Holding and Implications

The Upper Tribunal DISMISSED the appeal by HM Revenue and Customs.

The direct effect of this decision is that the First-tier Tribunal's ruling stands: Company A's Juice Cleanse Programmes are to be zero-rated as supplies of food rather than standard rated as beverages for VAT purposes. The decision confirms that the manner in which a product is marketed and consumed are legitimate and significant factors in VAT classification under Schedule 8 of the Value Added Tax Act 1994. No new legal precedent was established beyond affirming the established multi-factorial approach and the relevance of marketing and consumption context in classification cases.