Key Facts
- •HMRC appealed the First-Tier Tribunal's (FTT) decision that Innovative Bites Ltd.'s 'Mega Marshmallows' are zero-rated for VAT, not standard-rated confectionery.
- •The FTT found Mega Marshmallows are sold and purchased primarily for roasting, considering marketing, packaging, size, supermarket placement, and seasonal sales fluctuations.
- •The main issue was whether Mega Marshmallows fall under Excepted Item 2 (confectionery) of Schedule 8, Value Added Tax Act 1994 (VATA), considering its interaction with Note 5.
- •HMRC argued Note 5 is a deeming provision, automatically classifying items within its description as confectionery.
- •The taxpayer argued Note 5 is an inclusive definition requiring a multi-factorial assessment in all cases.
Legal Principles
Statutory interpretation requires considering the words in context and the provision's purpose.
R (Quintavalle) v Secretary of State for Health [2003] UKHL 13
Deeming provisions create statutory fictions; their extent depends on statutory construction and should avoid unjust or absurd results.
Fowler v HMRC [2020] UKSC 22
Inclusive definitions enlarge the meaning of a term but don't necessarily change its core meaning.
Bennion, Bailey and Norbury on Statutory Interpretation
In VAT classifications, a multi-factorial assessment is often necessary, considering various factors.
HMRC v The Core (Swindon) [2020] UKUT 0301 (TCC)
Appellate courts should be cautious when reviewing multi-factorial assessments; value judgments of the FTT should not be readily overturned.
R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28
Outcomes
The appeal was dismissed.
Note 5 is not a deeming provision but an inclusive definition. A multi-factorial assessment is permissible, even if a product initially seems to fit Note 5's description. The FTT's findings of fact, while not perfectly detailed, were reasonable and supported by evidence. The FTT correctly considered the 'typical consumer' perspective and relevant factors.