In Glanbia Milk Limited v HMRC [2022] TC08439, the First Tier Tribunal (FTT) found that a number of food products described as flapjacks were not zero-rated cakes for VAT purposes, but were standard rated confectionery.

  • Glanbia Milk Limited (Glanbia) was the representative member of a VAT group that produced 36 varieties of food products described as flapjacks.
    • The principal ingredients of the products were oats, syrup and protein.
  • The general VAT position is that Food of a kind used for human consumption is zero-rated.
    • This zero-rating does not extend to confectionery, which is standard rated.
    • An exception to this is where the confectionery is a cake, which is zero-rated.
  • Glanbia zero-rated the supplies it made on the basis that the flapjacks were cakes.
  • Following a visit by HMRC and subsequent communications between the parties, HMRC raised a VAT assessment on Glanbia on the grounds that its sales of the products should be been standard rated.
  • After a Statutory review by HMRC that upheld the VAT assessment, Glanbia Appealed to the First Tier Tribunal (FTT).

The FTT dismissed Glanbia's appeal, finding that the products were not cakes and so should have been standard rated for VAT:

  • It was unimportant whether the product was a flapjack or not. The key question was whether it was a cake.
  • The ingredients and manufacturing technique of the products sold would not be considered by an ordinary person to be an archetypal cake.
    • There was no baking involved during manufacture and the primary ingredients were oats (20% to 50%), syrup (21% to 39%) and protein (8% to 28%).
  • The texture and appearance of the products were not that of a typical flapjack or cake.
    • The products were individually wrapped and took the form of a bar. Their consistency was dense and chewy; more akin to a fruit or energy bar. Some products were crunchy.
  • The function and typical circumstances of consumption were not consistent with being cakes.
    • Due to the high protein content, an ordinary person would consider the products in question to be intended to produce physiological effects such as faster muscle recovery after exercise and growth of muscle mass. This is the opposite of the traditionally unhealthy image of a cake.
  • The products were originally targeted at consumers in the sport nutrition sector.
    • There was some evidence of them being sold on specialist sport nutrition websites.
  • The word ‘cake’ did not appear on the wrapping of any product nor was there evidence of such a reference to 'cake' being made outside of the VAT appeal.
    • The word ‘protein’ featured predominately on most products in question, often as part of the name. The ordinary person would regard the high intake of protein to be a purpose of the product: something which would not be considered the purpose of a cake.

As it was found the products were standard rated, Glanbia argued that the VAT assessment should be reduced by the amount of input tax that would have been recoverable on supplies within its corporate group, but outside of its VAT group.

By reference to the Zipvit decision, this appeal was also dismissed by the FTT.

UPDATE: This case has been appealed to the Upper Tribunal.

Useful guides on this topic

Food: Catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises? 

What are the conditions for forming a VAT group? What rules apply once a VAT group is in place?

Appeals: VAT
The process of making a VAT appeal largely follows that of direct taxes, however, there are some differences.

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

External link

Glanbia Milk Limited v HMRC [2022] TC08439

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