In Ferrero UK Ltd v HMRC [2025] TC09654, the First Tier Tribunal (FTT) found that Nutella Biscuits were not chocolate-covered and were therefore zero-rated for VAT.
Ferrero UK Ltd (Ferrero) produces a range of popular Food and confectionery products, including Nutella spread and Nutella Biscuits.
- Nutella Biscuits are constructed in layers, with Nutella filling and a ring made of a chocolate-like substance sitting within two baked biscuit elements that represent the outer surface of the product.
- Approximately 1mm of the chocolatey ring is visible around the circumference of the biscuit.
- Ferrero believed that the biscuits were zero-rated for VAT.
- HMRC issued a liability ruling letter stating that Nutella Biscuits should be standard-rated on the basis that they were covered in a chocolatey substance and therefore fell within the exception in Group 1 Schedule 8 VATA 1994.
- HMRC raised Assessments, charging output tax previously undeclared in respect of sales of the biscuits.
- Ferrero Appealed to the First Tier Tribunal (FTT).
Group 1 Schedule 8 VATA 1994 zero rates ‘food of a kind used for human consumption’, but contains numerous exceptions to the zero-rating.
Exception 2 excludes confectionery, not including cakes or biscuits, other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.
The FTT found that:
- The chocolatey ring was visible between the two baked biscuit elements. When viewed as a whole, all of the biscuit’s outer surface was not covered by the chocolatey ring, even to a de minimis extent.
- The manufacturing process, in accordance with the patent, assembled the final biscuit such that the Nutella and the chocolatey ring were lower than the outer surface and did not form part of it. The outer surface of the biscuit consisted entirely of the biscuit cup and disc lid.
- The biscuits were not covered and could therefore be zero-rated.
The appeal was allowed.
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