In Global By Nature Ltd v HMRC [2025] TC09396, the First Tier Tribunal (FTT) found that powdered vegan food supplements were zero-rated for VAT.
Global By Nature Ltd (GBN) imported, distributed and sold organic products in the UK, including powdered vegan food supplements under the brand ‘Sunwarrior’.
- GBN filed an Error Correction Notification requesting repayment of overdeclared output tax on some of its products that should have been zero-rated as food.
- HMRC disallowed the part of the repayment relating to ‘Sunwarrior’ products, arguing that the products sold under the brand were sports drinks and should be standard-rated.
- GBN Appealed to the First Tier Tribunal (FTT). The VAT in dispute was £798,856.
Group 1 of Schedule 8 to the Value Added Tax Act 1994 provides that Food and drink are zero-rated, subject to specific exceptions. Excepted Item 4A reads:
“Sports drinks that are advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk, and other similar drinks, including (in either case) syrups, concentrates, essences, powders, crystals or other products for the preparation of such drinks.”
Although there have been many appeals before courts and tribunals about the VAT status of various foods, this is the first that examines the meaning and effect of Item 4A.
HMRC argued:
- The wording of Item 4A provides a definition of ‘sports drinks’, in that they are drinks that are “advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk”.
- Any drink that is “advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk” is therefore a sports drink.
- The Sunwarrior brand website, promotional materials and packaging advertised the products as “designed to enhance physical performance, accelerate recovery after exercise or build bulk”.
- All Sunwarrior products fell within Item 4A and were therefore standard-rated.
GBN argued:
- Item 4A does not define what a sports drink is. It acknowledges that some sports drinks are advertised or marketed in a particular way, and it is those sports drinks that are standard-rated.
- Sunwarrior products were not sports drinks and were not advertised or marketed as such.
- All Sunwarrior products fell outside of Item 4A and were zero-rated.
The Tribunal agreed with GBN in that two tests should be used to determine whether a product fell within Item 4A:
- Is the product a sports drink?
- If so, does it meet the description in Item 4A?
The FTT found that:
- The products were drinks. Whilst the product’s website included some food recipe suggestions for the powder, it was primarily intended to be mixed with a liquid and served as a drink.
- The products were not sports drinks. There is no legal definition of a ‘sports drink’ so the FTT consulted dictionaries and other publications to arrive at the following definition: “a drink which contains a significant amount of carbohydrate (usually sugar) and may contain salts (such as sodium and potassium)”.
- The products contained less than 1g of carbohydrate per serving, and the FTT found that this could not be considered significant in any way.
- The first test was not met: the products were not sports drinks and did not fall within Item 4A.
The FTT did consider the promotional and marketing materials for all three Sunwarrior products and found that if HMRC’s view were adopted, one of the three Sunwarrior products would have been considered a sports drink in that it was marketed as a product designed to enhance physical performance, accelerate recovery after exercise or build bulk.
The appeal was allowed.
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?
Appeals: VAT
How do I appeal a VAT penalty? How can I request a Statutory Review? How do I appeal an HMRC decision?
Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?
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