Summary of Decision — Neutral Citation: [2025] UKFTT 1123 (TC)

Factual and Procedural Background

This appeal arose from assessments issued by Company B pursuant to section 73 of the Value Added Tax Act 1994 on 9 February 2022 to Company A. The assessments sought recovery of output tax alleged to have been under-declared for VAT accounting periods 02/20 to 05/21 in connection with the supply by Company A of 8g nitrous oxide (N2O) canisters described as cream chargers ("the Chargers"). Company B's position was that supplies should have been standard rated; Company A had treated them as zero rated. The total sum assessed after review was stated as £1,477,581.86.

Company A's procedural material included a witness statement from Attorney Parr (the company's former director) and documentary bundles. Company A's initial challenge emphasised perceived unfairness and uncertainty about VAT treatment when the business began; Attorney Parr said Company B had referred Company A to public guidance on food liability but had not provided a definitive view. Attorney Parr accepted that Company B never told Company A that the Chargers were properly zero rated. Company A did not dispute the quantum of the assessments if the Chargers were held to be standard rated.

Evidence before the Tribunal comprised documentary bundles, an expert report and supporting materials prepared for Attorney Tallon, and oral evidence. A letter from Attorney Niranjan (dated 28 January 2022) was in the bundle; an earlier procedural ruling by Judge Redston had held that that letter did not meet the formal requirements of an expert report under the Civil Procedure Rules, and directions were made for proper expert evidence. Company A did not serve a formal expert report in compliance with those directions. Company B sought exclusion of the letter; the Tribunal declined to exclude it but indicated it would treat it as correspondence and place weight on it only where consistent with the admissible expert evidence.

The Tribunal hearing took place on 8–9 September 2025 and the decision was given on 22 September 2025. The panel comprised Judge Brown and Judge Hussain. Company A was represented by Attorney Parr and Company B by Attorney Arhesty (instructed by Company B's general counsel). The Tribunal limited its role to determining the legal liability under Item 1 Group 1 Schedule 8 VATA (whether the N2O is "food of a kind used for human consumption") in light of the evidence and relevant authorities.

Legal Issues Presented

1. Whether the nitrous oxide contained in the 8g Chargers is "food of a kind used for human consumption" for the purposes of Item 1 Group 1 Schedule 8 VATA (and therefore eligible for zero rating).
2. Which party bears the evidential burden and whether Company A can, on the balance of probabilities, demonstrate that the supplies are properly zero rated.

Arguments of the Parties

Appellant's Arguments

• Company A submitted that the N2O in the Chargers is food. The Appellant relied on the fact that the N2O is sold as food-grade and regulated as a food additive (E942).
• Company A sought to draw a direct comparison with the Tribunal's decision in Phoenix Foods (bicarbonate of soda), arguing that, as in that case, the regulatory treatment and culinary use of the product meant it should be zero rated.
• Attorney Parr argued that the Chargers are intended exclusively for culinary use (whipping cream, making foams and mousses, infusion of liquids) and contended that N2O had nutritive significance because it is a constituent of air and, by enabling propulsion/whipping, provided energy in a broad sense.
• Company A also relied on product packaging and other materials showing the Chargers described as "Food Grade" and marketed for culinary use.

Respondent's (Company B's) Arguments

• Company B submitted that the question is a practical one for the perspective of an ordinary informed person, adopting the approach in the Court of Appeal authorities cited (Ferrero and P&G). The Tribunal should ask whether the N2O is "food" in ordinary use, not undertake over-elaborate legal analysis.
• Company B advanced a multifactorial assessment (as informed by prior decisions) including consideration of: nutritional value; palatability; form; directions for consumption; frequency of consumption; marketing; purpose; range of uses; constituent ingredients; and dictionary definitions.
• Company B reviewed multiple first-instance decisions and submitted that the case most analogous to the present facts was the first-instance decision concerning carbon dioxide/nitrogen used to create beer head (Gas & Chemicals Ltd v HMRC). Company B argued most factors were neutral or pointed against categorising N2O as food.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal confined its task to deciding whether the N2O in the 8g Chargers falls within Item 1 Group 1 Schedule 8 VATA as "food of a kind used for human consumption." It applied the established approach of adopting the perspective of an informed consumer (Ferrero and P&G) and undertaking an overall assessment of the relevant factual features rather than elevating any single factor to determinative status.

Key evidential findings that informed the Tribunal's analysis included:

• Documentary evidence (invoices) showed Company A supplied only 8g Chargers described on invoices in terms used for culinary equipment and sold in large commercial quantities to companies that appeared to be wholesalers or catering businesses; there was no evidence Company A supplied larger canisters.
• Packaging and manufacturer-sourced material (from Company C) described the Chargers as "N2O Food Grade E942", stated promotional use "for whipping cream with a Cream Whipper only" and included instructions that the product was not for medical use and should not be inhaled.
• Expert evidence from Attorney Tallon (accepted as expert) explained the food‑law definitions of "food", "ingredient" and "food additive"; confirmed N2O is regulated as E942; and described the physical and functional effects of N2O in a Cream Whipper (dissolution into fat, formation of foam, change in texture and mouthfeel, and the transient nature of the effect).
• The expert estimated conservatively that the maximum possible ingestion of N2O in a 150ml portion of cream whipped with an 8g Charger could not exceed 0.79g and was likely to be materially less; the N2O is colourless, odourless and tasteless and confers no calorific value (no protein, fat, carbohydrate or fibre).

Applying the legal test and weighing the relevant factors, the Tribunal made the following analytical points:

• Form and manner of consumption: N2O is, once released, a gas and therefore cannot be eaten or drunk in the ordinary sense. This is a strong indication it is not "food" in ordinary understanding.
• Palatability and perceptibility: N2O is effectively imperceptible (colourless, tasteless, odourless) in the quantities released from the Chargers; while this alone is not decisive (water is also tasteless), it undermines any suggestion N2O is akin to a conventional food.
• Nutritional value: The Tribunal distinguished the narrow, technical definition of "nutritional value" used under food regulation from the wider, ordinary-sense concept of "nutritious" used in VAT cases. Even assessed in a broad sense, N2O provides no sustenance or contribution to life or growth and thus fails that consideration.
• Ingredient/additive status: Although N2O is regulated as a food additive (E942) and functions as a processing aid (foaming agent/propellant) when used with a Cream Whipper, regulatory classification for safety and labelling does not automatically convert a substance into "food" for VAT purposes. The purposes of food regulation and VAT legislation differ.
• Effect on the food: N2O changes the form and texture of cream (creates foam) but does not alter the constituent food in the way that an ingredient such as bicarbonate of soda changes a dough or batter to produce a different food product. This distinction was central in differentiating Phoenix from the present case.
• Analogy with prior decisions: The Tribunal regarded the gases considered in G&CL (CO2/nitrogen used in beer dispense) as the closer analogy. As in G&CL, the gas imparts a transient physical effect and dissipates; an informed observer would not regard the gas itself as "food of a kind used for human consumption".
• Commercial context and market: The Chargers were supplied in large commercial quantities to catering/wholesale purchasers rather than as typical supermarket retail food products. Packaging and marketing emphasised use with catering equipment (Cream Whipper), reinforcing the view that the product is specialist equipment/supply for catering rather than a foodstuff sold to consumers for nourishment.

On the balance of probabilities the Tribunal concluded that the Appellant had not shown the Chargers to be "food of a kind used for human consumption" such that Item 1 applied.

Holding and Implications

APPEAL DISMISSED.

The Tribunal held that the nitrous oxide contained in the 8g Chargers is not "food of a kind used for human consumption" within Item 1 Group 1 Schedule 8 VATA. Consequently, the supplies of the Chargers are properly standard rated for VAT purposes and the assessments issued by Company B (total stated as £1,477,581.86 following review) were upheld.

Direct consequences: the appeal was dismissed and the assessments remain in place. The Tribunal did not identify or establish a new principle of general application beyond applying existing authorities to the facts; no broader declaratory precedent was created by this decision beyond the factual conclusion reached on these specific circumstances.

Procedural note (as contained in the decision): any party dissatisfied with this decision may apply for permission to appeal to the appropriate appellate body in accordance with the rules and within the time limits stated in the Tribunal's decision notice.