United Kingdom VAT & Duties Tribunals Decisions

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You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Biscuits (UK) Ltd v Customs and Excise [2005] UKVAT V18947 (22 February 2005)
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Cite as: [2005] UKVAT V18947

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United Biscuits (UK) Ltd v Customs and Excise [2005] UKVAT V18947 (22 February 2005)

18947

VALUE ADDED TAX — snack foods — flavoured Hula Hoops purchased with sachet of additional flavouring — VATA1994 Sch 8, Group 1, Excepted Item 5 — whether addition by consumer of contents of sachet to Hula Hoops amounts to "further preparation" — no — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

UNITED BISCUITS (UK) LTD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Colin Bishopp (Chairman)

Arthur Brown

Sitting in public in Manchester on 5 January 2005

Nigel Gibbon for the Appellant

Jonathan Cannan, counsel, instructed by the Solicitors office of HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. In this appeal we are required to determine the correct treatment for value added tax of a snack food, manufactured by the Appellant, which it sells under the generic name of "Hula Hoops". Those with which we are concerned are a particular variety marketed as "Shake 2 Flava".
2. The product consists of conventional Hula Hoops, that is rings of which the principal ingredient is potato, already flavoured; the example we had was of a chicken flavour. The product is packed in foil bags. Each bag contains in addition a sachet of further flavouring. The example with which we were provided was described as a barbecue seasoning. The consumer thus has the choice of eating the Hula Hoops with the original chicken flavouring alone, or of adding the barbecue seasoning so as to change the taste of the product.
3. The Appellant accepts that, without the additional flavouring, the Hula Hoops would fall within Excepted Item 5 to general Item 1 of Group 1 of Schedule 8 to the Value Added Tax Act 1994. The Excepted Item excludes from zero-rating "any of the following when packaged for human consumption without further preparation, namely potato crisps, potato sticks, potato puffs . . .". Such items are, by necessary implication, standard-rated and the Appellant acknowledges that, without the additional seasoning, Hula Hoops are within the exception and are standard-rated. It contends, however, that the addition of the seasoning amounts to "further preparation" with the consequence that the product does not fall within the Excepted Item and, correspondingly, is eligible for zero-rating.
4. The question we must decide, therefore, is the essentially simple one: can the process of opening a sachet of seasoning, sprinkling its contents into the open bag of Hula Hoops, and shaking the bag in order to distribute the seasoning reasonably evenly, amount to "further preparation"? The Appellant, represented by its solicitor, Nigel Gibbon, contends that it does and that the product is correspondingly zero-rated. The Commissioners, represented by Jonathan Cannan of counsel, contend the contrary. Their view is reflected in a letter of 9 December 2003, setting out their decision that the product is standard-rated. It is against that decision that the appeal has been brought.
5. For the Appellant, Mr Gibbon accepted that the Hula Hoops could be eaten without the flavouring contained within the sachet – indeed, the wording on the bag itself indicated that this was possible but, he said, that was not the test. The typical purchaser would not buy this product in order to eat it without the additional flavouring; it was designed to attract those consumers who wanted a barbecue flavour, which could be obtained only by adding the contents of the sachet. He accepted that the labour of opening the sachet and adding its contents to the bag was minimal but, he said, there are no degrees of preparation; the process either amounted to preparation, or it did not. And preparation meant no more than to make something ready, as a reference to dictionaries showed. It could not be said, he argued, that the preparation of the Hula Hoops by the addition of the flavouring differed in a material way from the addition of milk to breakfast cereal, a process which was accepted to amount to "further preparation".
6. Mr Gibbon relied upon what was said by the tribunal in Procter & Gamble UK (2003) Decision 18381, at paragraph 60, in which it expressed the view that "preparation" meant no more than "serving with", and that it was immaterial that the product could, if the consumer chose, be eaten without further preparation. The product under consideration in that case was a "dipping chip", consisting of a bland potato crisp designed to be eaten with a dip. The tribunal accepted that the crisp could be eaten without the dip, just as breakfast cereals could be eaten without milk, but concluded that the question to be considered was whether the product was "packaged" for consumption without further preparation. The dipping chips and breakfast cereals were not; and he maintained that this product was in the same category. Clearly it was packaged since it was available for retail sale only in the bags we have mentioned; and the packaging indicated that the sachet was included for purpose of enabling the consumer to change the flavour of the product.
7. For the Commissioners, Mr Cannan directed us first to an analysis of the relevant legislation set out in an earlier decision involving the same Appellant (2001 Decision 17391), which we need not set out again, but which he said demonstrated the importance of keeping the legislation and its purpose firmly in mind when applying the relevant test, namely whether the product could be consumed without further preparation, giving that phrase its ordinary meaning: for that proposition he drew upon what had been said by the tribunal, and approved by the Court of Appeal, in Customs and Excise Commissioners v Ferrero UK Ltd [1997] STC 881 at 884j. If we were to examine the ordinary meaning of "preparation", he said, we could conclude only that it did not encompass merely seasoning the product. One would not say that the act of adding salt or pepper to a meal already served on a plate amounted to "preparation", and the consumer was required to do no more in this case. There was no analogy with the crisps in the Procter & Gamble case, nor with breakfast cereals. In each case the consumer was required to add something else – the dip, or milk, obtained from another source. Here, everything was in the package. And the crisps with the dip, or cereal with milk, were capable of constituting a meal whereas this product was no more than a snack. Although the crisps or a cereal could be eaten alone, neither was intended to be eaten in that way and neither was complete without the dip or the milk. Here, the product could be eaten with or without the seasoning, entirely as the consumer chose.
8. We are not convinced that the need to obtain the dip or milk from another source is any more than a factor to be taken into account. We accept, too, that the possibility that a consumer might eat a product without undertaking the further preparation envisaged by the manufacturer is not decisive. In our view the phrase "packaged for human consumption without further preparation" should be considered as a whole; if it is, the manner in which the product is presented for sale, and what an ordinary consumer would do with it before eating it are material considerations. Here, we accept that a consumer is more likely to add the seasoning than not – though the probability is perhaps not so high as the likelihood that breakfast cereal will be eaten with milk. We accept too that pouring cereal into a bowl and adding milk involves little by way of preparation, though it nevertheless merits the term. Adding seasoning, however, is in our view of a different order. Even adopting Mr Gibbon's wide definition of the term, we do not consider that adding seasoning can realistically be described as "making ready". The product is ready to eat without the addition of the seasoning, in that it is palatable, unlike the bland crisps in the Procter & Gamble UK case, or breakfast cereals which cannot readily be chewed and swallowed without added liquid. The consumer has the choice of adding or not adding the seasoning but it is, as we see the matter, a choice rather than a reasonable necessity, and we are not persuaded that choice is enough.
9. We conclude therefore that the product falls within Excepted Item 5 and is standard-rated. The appeal is accordingly dismissed.

COLIN BISHOPP

CHAIRMAN

RELEASE DATE: 22 February 2005

MAN/03/823