In the latest instalment of a long-running £1.1m VAT dispute, the First Tier Tribunal has found that Nakd and Organix bars were ‘confectionery’ for VAT purposes.

In WM Morrison Supermarkets Plc v HMRC [2024] TC09095, the well-known supermarket, Morrisons, was unsuccessful in arguing that Nakd and Organix snack bars were zero-rated for VAT purposes.

  • In 2017-18, Morrisons had sought to recover output VAT of £1,097,326 on the basis that 18 types of ‘Nakd’ raw fruit and nut bars, and Organix bars designed for children, been wrongly standard-rated for VAT, and instead should have been zero-rated.
  • HMRC refused the repayment claim, stating that the bars had been correctly standard-rated as confectionery, falling into the List of excepted items that were not zero-rated food.
  • Morrisons Appealed, arguing that the bars were not confectionery, or alternatively, should have been zero-rated as cakes.
  • In 2021, the First Tier Tribunal (FTT) Dismissed Morrisons' appeal, finding that both types of bars were confectionery and not cakes.
  • Morrisons appealed to the Upper Tribunal (UT), which, in 2023, held that the FTT had made errors of law in its decision. It remitted the case back to the FTT for reconsideration.

In remaking the decision, the FTT concluded that it had to consider whether the informed ‘ordinary person in the street’ would regard the products as confectionery. The FTT set out that 'confectionery' meant food items that:

  • Have been produced by a process of mixing or compounding, but not necessarily cooking, the ingredients.
  • Taste sweet, either as a result of the inherent sweetness of one or more ingredients or as a result of the addition of sweetening, regardless of whether they also taste bitter, salty, sour or spicy.
  • Are normally eaten with the fingers in small quantities as a snack or a treat and not as a main meal or part of one.

The FTT undertook a multi-factorial assessment, and found that the bars were confectionery:

  • The bars looked, felt, and tasted like confectionery products. They:
    • Were a similar size to chocolate or candy bars and were clearly intended to be eaten with the hands.
    • Were slightly sticky to the touch and soft when squeezed, sharing a soft, moist and chewy mouthfeel, although some had a cereal-like texture or were denser and more fudgy.
    • Had an energy density and mouthfeel similar to nougat and fudge.
    • Tasted sweet with predominant flavours that were commonly found in confectionery, such as being fruity, chocolatey or nutty.
  • The bars were eaten in the same way as confectionery: with the fingers, as snacks or treats between meals.
  • The manufacturing process did not preclude the products from being confectionery: critically, they were mixed or compounded.
  • While the main ingredients (dried fruits, nuts and oats) were not usual ingredients of sweets and chocolates, the term ‘confectionery’ was not limited to sweets and chocolates.
  • The packaging of the products was not informative of classification. While it identified them as snacks, many snack foods are not confectionery.
  • The placement of the products within a retailer’s store was a neutral factor.
  • The importance of the look, feel, and taste of the products outweighed any factors that suggested that they were not confectionery.

The FTT agreed with the earlier FTT decision that the bars were not cakes or flapjacks: they did not have enough characteristics of a cake and were not marketed as cakes. 

The appeal was dismissed.

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? 

How to appeal an HMRC decision
Disagree with an HMRC decision? How do you appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

WM Morrison Supermarkets Plc v HMRC [2024] TC09095