VAT and Food. An amusing mess.

I’m not sure how many of you will have heard the news in the UK yesterday that Innocent (those of the smoothies) lost a High Court case on trying to get their VAT back.

I am never going to turn this blog into a news related site but I had to comment on this as the concept of the argument is crazy. In summary, VAT (Value Added Tax) is added to any food product where value has been added. If you were to go into a shop and buy a banana, you are buying it in its most basic form and therefore no value has been added to it and you don’t pay VAT. Innocent’s argument was that they are just adding fruit together and blitzing it before putting it in packaging, adding no additional flavours, and as a result they are adding no value. The High Court didn’t agree and stated that by adding a pineapple to a banana you are adding value to the banana. Jeez.

I thought I would look in some more detail at what other products were subject to VAT and what were not and what I found amused me. Hamburgers in their raw form are not subjected to tax as apparently you add the value when you cook them (does that mean we should be taxed?) but if you buy part-cooked burgers you need to pay the VAT as they have started to add value. Nuts are a great example as if they have been shelled you are paying 17.5% in tax on top, but unshelled you pay no VAT.

And then there is the case of the Jaffa Cake and this is a brilliant story. For some reason cakes and plain biscuits are subject to no VAT. This being the case I have no idea how Innocent lost their case as cakes are surely ingredients put together to add value in the form of a cake. HM Revenue and Customs approached McVitie who manufacture Jaffa Cakes and explained that they believed that they were actually making biscuits and not plain biscuits at that. McVitie pointed out that this was nonsense as otherwise they would have called them Jaffa Biscuits and to prove their point made a massive Jaffa Cake to show that of course it is a cake and the product they sell are just mini versions. In addition to this, to firm their point, they made the point that cakes go hard when stale and biscuits go soft – Jaffa Cakes going hard. They won.

So – in summary, VAT on food in the UK is a mess, but quite an amusing mess.


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