Enter Your E-mail

Steve Allen of VAT Advisers Ltd highlights a selection of recent VAT cases.

Tribunal says Information Security Body can be Exempt 

This case considered whether the Appellant, a body which represents information security professionals, could qualify for exemption as a not-for-profit professional body.

The Tribunal established that there was no written examination required for entry into the profession (entry was by oral exam to test practical application of knowledge), and that information security can only be studied at two UK institutions. However the intention of the Appellant was to foster professional expertise amongst its members so that, in time, information security might become recognised as a profession. The Appellant existed to show that people were competent in the field, and also spoke to governmental and regulatory bodies.

The Tribunal came to the conclusion that information security was not a profession, but held that, as the exemption in VATA 1994 Sch 9 Group 9 Item 1c mentioned both professions and employment, the exemption was wide enough to cover the Appellant. As such, it could be viewed as a non-profit making association fostering professional expertise and could exempt its membership subscriptions.

Institute of Information Security Professionals (TC00303)

Tribunal says Appellant sold Standard-Rated Hot Food

The Appellant delivered food to customers by motorcycle. Its menu included salads, Italian, European, Japanese, Chinese, Thai and Indian dishes, and also puddings, wines and beers, and snacks. In July 2008, the Appellant submitted a £184,945 voluntary disclosure claim on the basis that some of its food items were zero-rated. HMRC rejected the claim.

VATA 1994 Sch 8 Group 1 provides for the zero-rating of food, and is notoriously complex. However, one of the exceptions to zero-rating is the supply of ‘hot food’, which is defined as:

1. food which has been heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and
2. is above that temperature at the time it is provided to the customer

The food items in dispute were aromatic crispy duck pancakes, spring rolls, samosas, falafels, sesame prawn toast, onion bhajis, and various types of bread.

The Tribunal quickly concluded that all the items were delivered to customers above ambient air temperature. The issue was the reason for the heating, and on this point, the Tribunal was divided. One panel member considered there were two purposes for the heating, with the dominant one being to provide freshly cooked food. The Chairman disagreed, finding that demonstrating the food was freshly cooked and enabling it to be consumed hot were different ways of describing the same thing.

The Chairman differentiated zero-rated heated chickens on the basis that nothing was provided to maintain heat, whereas here, food was stored and transported with the aim of maintaining heat. The Chairman added that the only way to prove the difference between whether the food is meant to be consumed hot or cold would be to supply the items cold. Of course, a roast chicken would still be palatable cold.

With the Chairman’s casting vote, the Tribunal found the items were standard-rated hot food. The appeal was therefore dismissed.

Deliverance Ltd (TC00289

Tribunal says Lolly-Making Kits are Single Zero-Rated Supplies

This case considered whether the supply of a chocolate lolly-making kit was a single zero-rated supply. Both sides agreed that it was a single supply, but HMRC saw it as being standard-rated, and had issued an output tax assessment to the Appellant for £95,856 in September 2008.

The kit comprised white and milk chocolate flavour buttons (i.e., not real chocolate), edible icing, 12 sticks, and a plastic mould that would make six themed lollies by melting the buttons in the mould. The mould was designed to be used only twice, as it was plastic and quite fragile, needing to be heated to make the lollies, and then flexed to remove them once cool. The buttons (not being real chocolate) and icing would be zero-rated baking products if supplied on their own, and made up over 80% of the total cost.

HMRC argued that the shape of the moulds (which were of Scooby Doo and other cartoon or TV characters) and the theme of the kit and its packaging, comprised the essential feature of the supply. The Tribunal, however, found that the essential feature was to make a zero-rated food product. The sticks and mould were ancillary to the main element, and were a means of better enjoying it, so the principles of Card Protection Plan applied. The kits put the customers in the position to make a product that would be zero-rated if they bought it readymade, and so a different liability could not apply to the kit than would apply to the completed products. As such, although the kit and readymade lollies were not, on the face of it, the same supply, the Tribunal held that they should be taxed as if they were. The appeal was upheld.

Supercook UK LLP & Dr Oetker UK Ltd (TC00332)