HMRC internal manual

VAT Food

Excepted items: beverages: fruit juice

Prior to 1st December 1993, the law taxed manufactured beverages. Following the tribunals of Sunjuice (LON/92/73Y) and Tropicana (LON/92/234Z), which resulted in contradictory decisions as to what constituted manufactured, the law was changed to remove the word manufactured, thereby bringing all fruit juice beverages within the standard-rating for beverages.

Following the 1993 change in the law, the tribunal reconsidered the meaning of beverage in the case of Smith Kline Beecham PLC (LON 95/1704A), this case concerned the liability of a new range of fibre enriched drinks called Ribena Juice +. These are fruit juice drinks with roughage from fruit and cereal sources added, aimed at the health-conscious to enable increased intake of dietary fibre.

The appellant claimed that the price differential with ordinary drinks (Juice + being considerably more expensive) meant that purchasers were taking a deliberate decision to buy a health food rather than a beverage. The tribunal accepted the definition of beverage given in the Bioconcepts Ltd case (see VFOOD7520) and had no hesitation in affirming that the product under appeal was a beverage by that definition. The appeal was dismissed.

The Grove Fresh tribunal (V.19241) is also of note as a case which considered products that were a blend of fruit and vegetables (mainly vegetables). The appellant argued that they were not beverages, or alternatively were meal replacements, or that the products should be given the same liability treatment as certain cold soups that they were similar in appearance to. The tribunal rejected the arguments and agreed with HMRC that the products were beverages and were included within excepted Item 4. Notably, this also affirmed in case of doubt that vegetable juices definitely fall within that part of the law.

Culinary use

Lemon or lime juice held out for sale in retail packs solely for culinary use remains zero-rated as it is not a beverage.

Smoothies and puréed fruit

This presents an altogether trickier liability area due to the increasing development of a wide range of products made from pureed, pulped and blended fruits and vegetables. The basic position is that such products are either beverages (which will be standard-rated - except where they are milk based) or fruit prepared for culinary uses (zero-rated).

Examples of the culinary varieties (Z/R)

Jars, bottles or sachets of puréed fruit sold for use as pie fillings, for making relishes such as mango chutney; pots of pureed fruit for spoon feeding to young children and similar: These are not beverages and accordingly are zero-rated.

Similarly, small foil sachets of very thick puréed fruit (akin to baby food in texture) are not beverages and are zero-rated.

Examples of puréed fruit beverages (S/R)

Puréed fruit and vegetable drinks (commonly referred to as smoothies) either made to order or pre-packaged for retail sale are standard-rated.

Kalron Foods Ltd (V.19738 and [2007] EWHC 695 (Ch)) considered such a product. The appellant believed that their made-to-order smoothies, which were freshly prepared from retail outlets in shopping centres, should be zero-rated, as they were effectively no more than a supply of puréed fruit. HMRC argued that the trader was selling a beverage. The tribunal found in favour of HMRC in a decision later upheld by the High Court.

Innocent Limited [2010] UKFTT 516 (TC) considered the liability of pure fruit smoothies. The appellant considered them to merely be a liquefied fruit salad whereas HMRC considered them to be a beverage. The appellant relied on the Bioconcepts test (see VFOOD7520) and argued that they did not meet the criteria of that test. The dispute centred around whether fruit smoothies were commonly consumed to hydrate or quench thirst.

The Tribunal considered the criteria in the Bioconcepts test but in addition also considered

  • how the smoothies are consumed- were they consumed as drinks or were they merely drinkable liquids?
  • how the smoothies are made and from what, and what is their resulting appearance and texture;
  • where the smoothies are sold and consumed;
  • when the smoothies are consumed;
  • their effect on the human body;
  • why the smoothie is consumed; and
  • comparison with other products.

The Tribunal having heard a wealth of evidence from both sides based on the facts of the case concluded that smoothies were a beverage.

Smoothies are beverages and therefore are standard-rated. However, smoothies that incorporate milk products (smoothies often include milk or yoghurt) may be zero-rated. See VFOOD7660 for guidance.