In WM Morrison Supermarket PLC v HMRC [2023] UKUT148, the Upper Tribunal held that the First Tier Tribunal had erred in deciding that Nakd raw fruit and nut bars and Organix bars were confectionery for VAT and remitted the case back to the lower court to reconsider.

  • In 2017-18, Morrison claimed that output tax of £1,000,163.69 had been overpaid on 18 types of ‘Nakd’ raw fruit and nut bars plus tax of £97,162.80 on Organix bars for children. The claim was on the grounds that the bars had been wrongly standard-rated instead of zero-rated.
  • HMRC decided the bars were standard-rated as confectionery, falling into the List of excepted items that were not zero-rated as foods and refused the claim for repayment.  
  • Morrison Appealed, arguing that the bars are not confectionery, or alternatively should be zero-rated as cakes.

The First Tier Tribunal (FTT) dismissed the appeal on the grounds that both were confectionery finding that the bars:

  • Did not look like most cakes, are not held out for sale as cakes and would not look ‘in place’ on a plate of cakes.
  • Were not called ‘cakes’, but rather ‘bars’.
  • Were sweet to taste and are sold and marketed as snacks.
  • They compared ingredients finding that the sugar content of the bars was generally lower than that of confectionery such as Mars Bars, Maltesers and Kit Kats.
  • Morrisons Appealed again.

The Upper Tribunal (UT) allowed Morrison’s appeal, setting aside the FTT decision.

  • The FTT had made an error in law in directing itself to exclude the factor of whether the products were healthy or junk food, stating healthiness was irrelevant.
  • They had also erred in law in failing to consider the absence of traditional confectionery ingredients used in the bars such as cane sugar, butter and flour.
  • These errors of law were material to the case as they might have made a difference to the decision had they been taken into account.
  • Confectionary for VAT includes ‘sweetened prepared food’. The FTT had rejected HMRC’s argument that this includes products that are inherently sweet and the UT agreed.

The UT declined to remake the decision on the basis that further detailed findings of facts were required, instead remitting the case back to the FTT on condition that:

  • The remitted appeal be heard by a differently constituted tribunal (to be selected by the FTT President).
  • The FTT shall make its determination on the basis solely of the evidence that was taken into account by the original FTT.
  • The new FTT may conduct its own test of the taste and texture of the products insofar as samples of these are still available.
  • The FTT may, if possible, have access to the recording and transcript of the original hearing.
  • The FTT shall, having made any such additional findings of fact on the basis of the evidence before the original FTT (and if applicable its own taste test of the product samples), perform its own fresh evaluation of whether the products are 'confectionery'.

We now await the FTT's revised decision.

Useful guides on this topic

Food: catering and takeaway
There is often confusion as to how food is treated for VAT purposes. There is a difference between hot food, cold food, food consumed on and off-premises, and of course between biscuits and cakes. Our guide explains the rules.

Let them eat VAT
Silly VAT fact of the day: Snowballs are cakes (the tax tribunal says so). (2014)

External links

WM Morrison Supermarket PLC v HMRC [2023] UKUT148 

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