Policy paper

Revenue and Customs Brief 6 (2021): VAT liability of juice cleanse programmes

Published 17 May 2021

Purpose of this brief

This brief clarifies HMRC’s policy concerning the VAT treatment of supplies of juice cleanse programmes following the Upper Tribunal case involving The Core (Swindon) Ltd UT/2019/0049 (‘The Core’).

The issue in this case was whether the sale of juice cleanse programmes were standard-rated beverages or zero-rated meal replacements.

Who needs to read this

Businesses that sell juice cleanse programmes and their advisers.

VAT liability background

Supplies of most food and some drinks are zero-rated under UK legislation (the relevant provisions can be found in Group 1 of Schedule 8 to the Value Added Tax Act 1994).

Beverages

The legislation standard rates ‘beverages’ (including fruit juices). While most drinks are beverages, some drinkable liquids (for example some liquid foods) are not beverages and are zero-rated for VAT purposes.

Generally, HMRC decides whether a drink is a beverage by reference to the characteristics set out by the Tribunal in Bioconcepts Ltd versus HMRC (1993) (‘Bioconcepts’). Therefore a drink will be a beverage if it is commonly consumed and characteristically taken for one or more of the following purposes:

• to increase bodily liquid levels
• to satisfy thirst
• to fortify
• consumed to give pleasure

However, the High Court in Kalron Foods (2007 EWHC 695 (Ch)) pointed out that this guidance is unlikely to be exhaustive (see how to determine whether a drink is a beverage).

Meal replacements

HMRC accepts that products designed specifically as complete meal replacements (and so provide users with the necessary calories and nutrients of a meal) can be zero-rated. These include meal replacements in liquid form to be used as part of a slimmer’s diet and certain products to promote weight gain in convalescence. Such products are normally regulated by legislation and may be given under medical supervision or on prescription.

Litigation in The Core

The Core operates a juice bar which offers juice cleanse programmes comprising fresh drinks made by juicing raw fruits and vegetables. The programme is based on the consumption of 4 × 500 millilitre bottles of juices and smoothies per day and is run over a number of days – for example, a customer might undertake a 5-day juice cleanse programmes whereby meals are replaced by 4 juice cleanse programme juices and smoothies each day.

The First-tier Tribunal decision

Based mainly on the fact that the juice cleanse programmes were marketed as meal replacements, the evidence of 2 of its customers and the testimonials on The Core’s website, the First-tier Tribunal found that the juice cleanse programmes were generally purchased as meal replacements and not as beverages, and so were zero-rated.

HMRC had concerns about the significance of the weight attached to the way in which the juice cleanse programmes were marketed as meal replacements, without testing the credibility of those claims.

No expert witness evidence was heard by the Tribunal, but on the NHS website for nutritional advice on ‘Water, drinks and your health’ states that a 150 millilitre glass of unsweetened fruit juice, vegetable juice or smoothie can only count as a maximum of 1 portion of your recommended 5 daily portions of fruit and vegetables.

It goes on to advise people not to exceed this amount – this compares to The Core’s recommended intake of 2,000 millilitre of such drinks each day as part of its juice cleanse programmes.

HMRC therefore appealed the First-tier Tribunal decision to the Upper Tribunal.

The Upper Tribunal decision

While the Upper Tribunal did not overturn the First-tier Tribunal decision, it did confirm that in all cases involving classification for VAT purposes it is necessary to carry out a multifactorial assessment (that is to consider all of the relevant facts – see how to determine whether a drink is a beverage).

As part of that assessment, the way in which a product is marketed is potentially relevant in every case – in some cases, it will carry very little weight and in other cases, it may carry great weight. The ‘amount’ of weight to be attributed to marketing is case specific. The Upper Tribunal has therefore endorsed a fact specific stance rather than the more expansive approach taken by the First-tier Tribunal.

This is consistent with HMRC’s approach to such cases. Since the decision in this case was based on the specific facts found by the Tribunal, HMRC has decided not to appeal the Upper Tribunal decision. However, going forward each case must be decided on its own facts.

How to determine whether a drink is a beverage

In many cases it will be clear whether a drink is a beverage by reference to the characteristics set out in Bioconcepts. However in some less-straight-forward cases, it will be necessary to go on to conduct a more detailed multifactorial assessment, which is likely to include consideration of:

• how the drink is held out for sale – for example how it is labelled, packaged, displayed, invoiced, advertised and marketed
• circumstances of consumption – for example why it is consumed and when it is consumed
• taste and texture
• ingredients
• manufacturing process

More information

For information about the VAT treatment of drinks see section 3.7 of Food products (VAT Notice 701/14) and VFOOD7520 of the HMRC Internal Manual. For information about meal replacements read VFOOD2700 and VFOOD7780 of the HMRC Internal Manual.