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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Golden Wonder Ltd v Customs and Excise [2004] UKVAT V18650 (14 June 2004) URL: http://www.bailii.org/uk/cases/UKVAT/2004/V18650.html Cite as: [2004] UKVAT V18650

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18650

VAT — zero-rating — snack foods eaten with the fingers — whether food "sweetened" — added sugar neutralised by acid — overall sweetness of product less than sweetness of principal ingredient

MANCHESTER TRIBUNAL CENTRE

GOLDEN WONDER LIMITED Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr C P Bishopp (Chairman)

Mr M Farooq (Member)

Sitting in public in Birmingham on 25 May 2004

Amanda Brown, solicitor, of KPMG, for the appellant

James Puzey, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004


 


DECISION
1. The combined effect of section 30 and item 1 of Group 1 of Schedule 8 to the Value Added Tax Act 1994 is that "food of a kind used for human consumption" is normally zero-rated. However, the text of Schedule 8 goes on to identify a number of items within that general description which are excepted from zero-rating. Item 2 is "'Confectionery', not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance". Interpretation of the text is assisted by some notes which, as they form part of the Schedule itself, have the same statutory effect. The relevant part of note (5) reads "for the purposes of item 2 of the excepted items 'confectionery' includes chocolates, sweets and biscuits; drained, glacé or crystallised fruit; and any item of sweetened prepared food which is normally eaten with the fingers". Items excepted from zero-rating are necessarily standard-rated.
2. We are required for the purposes of this appeal to determine how those provisions are to be applied to two products manufactured by the appellant. For reasons immaterial to this appeal they are no longer manufactured but the appellant nevertheless requires a ruling partly because the appropriate treatment of the products is relevant to its past tax liability, and partly because it seeks guidance in respect of similar products. In formal terms, the appeal is against the decision set out in a letter from the Commissioners to the appellant's advisers of 2 April 2002 that both products are standard-rated. However, the Commissioners have modified that view in the light of the tribunal's decision in United Biscuits (UK) Ltd v Customs & Excise Commissioners (2004, decision 18596) and now accept that one of the products is to be regarded as a zero-rated biscuit. The appellant, while not rejecting that outcome, prefers nevertheless to argue that the product is zero-rated for other reasons.
3. Both of the products were marketed under the appellant's name of "Golden Wonder" and under the product title "Fruitwonders". The first, called "Bites" consists of a cereal shell with a liquid or viscous fruit filling. It is this product which is similar to that considered in the United Biscuits case and which the respondents now accept to be a biscuit; since it is not covered in chocolate it is zero-rated. The other product, known as "Smooths", is described on the pack as "raisins covered in a strawberry flavoured coating". We understand that other flavourings were also available. The coating in this case does not have a cereal content and it is accepted on both sides that it cannot be regarded as a biscuit.
4. The appellant was represented by Amanda Brown, solicitor with the appellant's accountants, KPMG. She called one witness, Alan Duncombe, who was the appellant's development manager but also put in the statements of Jennifer Mann, Isobel Crawford and Graeme Beattie. Ms Mann deals with the marketing of food products and her statement exhibited a large volume of statistical material demonstrating the changes in eating habits within the United Kingdom over recent years. Ms Crawford's statement deals with the technical properties of various types of sugar. Mr Beattie is the appellant's head of new product development; his statement deals with the reasons why these two products were developed and marketed. The respondents were represented by James Puzey of counsel, who put in no evidence.
5. We examine the "Bites" first. As we have mentioned, they have a cereal-based outer shell; the shell contains some sugars. The filling is based on a fruit paste. The evidence we had from Mr Duncombe and Ms Crawford indicated that the fruit filling was naturally sweet. A problem which needed to be addressed, however, was the propensity of the moisture – water – within the fruit filling to permeate the outer shell, which consequently lost its crispness. The chosen method of avoiding the water migration was to stabilise the moisture content of the filling by adding sugar to it. This process, however, had the effect of making the product excessively sweet, and it was necessary to remove the excessively sweet taste by the addition of acid.
6. The principal ingredient of the "Smooths" is the raisins. In order to produce the finished product, the raisins are first tumbled in a blend of sugar and starch, in order that the raisins separate from each other. The raisins are then coated in what Mr Duncombe described as a "fruit-flavoured fat based coating" and then further processed in order to stabilise the coating; that processing also involves the addition of sugar.
7. Mrs Brown's argument for the appellant concentrated primarily on the use in the legislation of the word "sweetened"; she conceded, as inevitably she must, that these were prepared foods normally eaten with the fingers and, if they are properly described as "sweetened", they are standard-rated confectionery. "Sweetened", she argued, implied the addition of sugar or some other sweetening material for the purpose of making the product sweeter to the taste. Sugars had not been added to the "Bites" filling for that purpose, but in order to obtain moisture stability, and sweetening was not even a by-product since positive steps had been taken to reduce the sweetness. She relied for that argument on the decision of the tribunal in SIS (Science in Sport) Ltd v Customs & Excise Commissioners (2001, decision 17116) in which fruit and cereal bars which would normally have contained apple and blackcurrant were found by the manufacturer to be too sweet and accordingly grape juice was substituted for apple juice with the intention, and effect, of reducing the sweetness. The tribunal found that, although the grape juice was sweet, the bars had not been sweetened within the meaning of the legislation. We accept that sweetness, as such, is not sufficient; something must have been done to make the product sweeter than it otherwise would have been: see Smith Kline Beecham plc v Customs & Excise Commissioners (1993, Decision 10222).
8. The evidence about the Bites which we had from Mr Duncombe and Ms Crawford did not indicate that, even after the addition of the acid, the sweetness of the finished product was less, or at least no greater, than that it had before the sugars were added for the purpose of improving the moisture stability. Assuming, however, that the overall effect of adding both sugar and acid was neutral, in terms of resulting sweetness, it seems to us that Mr Puzey's argument, that the cereal based shell has sugar added to it and is therefore sweetened, is insuperable. Mr Duncombe's evidence was that the shell was sweetened in order to "bridge the taste gap between the savoury cereal shell and sweet fruit filling". We are willing to accept that, even after the addition of sugar, the outer shell is less sweet than the filling but the fact remains that the shell, as well as the overall finished product, is sweeter than it would be had sugar not been added to the shell. Consequently, it seems to us, the product must be regarded as sweetened.
9. Mrs Brown argued that Ms Mann's evidence showed that eating habits in the United Kingdom had changed over recent years and that we should interpret the legislation in the light of these changes, in order to derive its purpose which, she said, was to differentiate between food bought for its nutritional qualities and food bought for other reasons. That was the approach of the tribunal in Proctor & Gamble UK Ltd v Customs & Excise Commissioners (2003, Decision 18381) in which a careful and detailed examination of the purposes of the legislation was conducted. It was a feature in the United Biscuits case to which we have referred, too, where the meaning of the word "biscuit" had to be considered against the background of major developments in production technology over a period of 40 years.
10. However, we do not consider any similar exercise is necessary, or permissible, here. It may be that tastes have changed, and it may be that some might buy "Bites" for their perceived nutritional value. Neither feature alters the fact that the product is "sweetened". That is an ordinary English word whose meaning, in our view, has not changed over the years as the meaning of a word such as "biscuit" has. If the legislation does not now correctly reflect Parliament's intention, it is for Parliament to change it; we cannot disregard the, in our view, clear words of the Act but must instead apply their ordinary meaning. Furthermore, there is no scope for over-elaborate analysis: see Customs & Excise Commissioners v Ferrero UK Ltd [1997] STC 881.
11. We accordingly conclude in relation to "Bites" that they do not fall outside note (5) by reason of their not being sweetened. They are, however, zero-rated by reason of their being biscuits.
12. It seems to us that the arguments in relation to "Smooths" are very similar. We accept the evidence that the raisins, which are naturally sweet, contain more sugar by proportion than the coating, and that of the two components of the product they are correspondingly sweeter to the taste. Nevertheless, sugar has been added to the coating, nothing has been done to neutralise its sweetening effect and both the coating and the overall product are sweeter than they would have been had no sugar been added to the coating. They must, therefore, be regarded as sweetened products and (as no other provision of the legislation was suggested to be appropriate) they must be standard-rated.
13. The appeal is therefore, dismissed. We make no direction in respect of costs.

COLIN BISHOPP

CHAIRMAN

Release date: 14/06/04

MAN/02/0334