Nestlé UK Ltd. loses its Case – Strawberry and Banana Nesquik are liable to standard rated VAT


Chocolate milk


Nestlé has lost its appeal against the original 2016 ruling by the UK’s First Tier Tribunal over the VAT treatment that should apply to its strawberry and banana flavoured Nesquik powders.


The First Tier Tribunal found in favour of the HMRC not repaying the £4 million of output VAT which had been over declared by Nestlé on these products.  Nestlé’s grounds for seeking this repayment were that the fruit flavoured powders were liable to the zero VAT rate as they were deemed to be “a powder for the preparation of beverages.”


The Tribunal held in favour of the HMRC that the products in question should remain at the standard VAT rate and as a result, no claim for the over declared output VAT is to be allowed.


Nestlé argued that strawberry and banana Nesquik should be zero rated. The reason being that they encourage milk drinking and milk is zero rated.


Nestlé also argued that these flavours should have the same VAT treatment as the chocolate flavour powder because they are in essence, the same product.


Both Nestlé and the HMRC agree that the chocolate flavoured Nesquik should be zero rated on the basis that this product contains cocoa thereby allowing it to fall within the list of “exceptions to the excepted items” according to the UK’s zero rating provisions.


The Upper Tribunal pointed out that there are number of other anomalies within the VAT system. For example, the fact fruit salad is zero rated while fruit smoothies are liable to VAT at the standard rate.


This case is likely to be appealed by Nestlé.


The lesson to be learnt from this case is that advice should always be sought in advance, especially with regard to new supplies, to ensure that the correct VAT treatment is always applied.


The full ruling can be found here:


 Nestlé UK Ltd and the Commissioners for Her Majesty’s Revenue and Customs, [2018] UKUT 29, Appeal number: UT/2016/120 





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