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Ocean Grown UK Ltd v Revenue & Customs [2008] UKVAT V20562 (31 January 2008)

20562

Value added tax – zero-rating – Wheatgrass – Whether a beverage – Bioconcepts Ltd and Kalron Goods Ltd considered – No – VATA 1994 s.30(2) and Sch 8 Grp 1 Item 1 Excepted Item 4 – Appeal allowed

LONDON TRIBUNAL CENTRE

OCEAN GROWN UK LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: MISS J C GORT (Chairman)

MRS LYNNETH SALISBURY

Sitting in public in London on 21 & 22 November 2007

Mr Andrew MacNab of counsel, instructed by Smith & Williamson, for the Appellant

Mr Alan Bates of counsel, instructed by the Solicitors Office, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

There was confusion initially as to whether the Appellant was `Ocean Grown UK Ltd' or another company called `Tonic Attack Ltd'. Tonic Attack is the name of a wheatgrass product produced by Ocean Grown UK Ltd ("Ocean Grown") which, it was agreed at the hearing of the appeal, was the proper Appellant.

The appeal was initiated by way of a notice of appeal dated 2 September 2006 which gave the name of the Appellant as "Tonic Attack Ltd" and gave the Appellant's VAT registration number as 840 3930 42. The notice of appeal identified the subject matter of the appeal as being a decision of the Respondent Commissioners for HM Revenue and Customs ("HMRC") dated 31 July 2006.

The ruling dated 31 July 2006 was in effect the same as a ruling given to Ocean Grown (whose VAT registration number is 840 3930 42) on 12 December 2005. That ruling was given in response to a request from Ocean Grown dated 29 November 2005 for advice as whether "a health drink of wheatgrass juice" (which was described as consisting of "a pure and pasteurised juice made from freshly cut wheatgrass which is grown hydroponically using diluted ocean water") was standard rated or zero-rated for VAT purposes. The decision was that the product, which is known as "Tonic Attack", is a "beverage" and hence subject to VAT at 17.5% under the Value Added Tax Act 1994 ("VATA"), Schedule 8, Group 1, Item No.1, Excepted Item No.4.

Ocean Grown is registered as Company No.05120381. Mr Oliver Dowding is the Managing Director, controller, and sole shareholder of Ocean Grown. Tonic Attack Ltd is registered under Company No.05320360. Mr Oliver Dowding is the Managing Director, controller and sole shareholder of Tonic Attack Ltd.

Ocean Grown was registered for the purposes of VAT with effect from 6 May 2004. Tonic Attack Ltd has never been registered separately for the purposes of VAT. With effect from 1 July 2007, Tonic Attack Ltd and Ocean Grown were registered as a VAT group under VAT group registration 904 4523 46. Ocean Grown is the representative member of that group.

On 24 March 2005 Mr Dowding telephoned HMRC to seek a definition of what VAT rating would apply to wheatgrass juice. He was told it would be a "food" and not a food supplement, and would thus be zero-rated.

By a letter dated 12 December 2005 that ruling was changed. HMRC stated that they considered that wheatgrass juice was a "beverage" for VAT purposes and should therefore be standard-rated.

The notice of appeal identifies the sole ground of appeal as being that the product is "food and thus should be zero-rated".

Background

In 2004, as a result of reading an article in "Acres USA", and as a result of meeting a Mr Don Jansen (a farmer based in Nebraska), Mr Dowding decided to produce and sell wheatgrass juice in the United Kingdom using a method known as "Ocean Grown". The "Ocean Grown" method involve the growing and developing of products hydroponically (i.e. without soil) using "sea water", which is said to contain the whole spectrum of minerals required by plants and animals. The "sea water" in question is created artificially by diluting a proprietary and patented product called "OceanSolution", which is a concentrate containing the 90+ elements, compound and bacteria found in sea water and is, in effect, a concentrated form of sea water, with a product known as "Reverse Osmosis" water.

Mr Dowding incorporated Ocean Grown UK Ltd and Tonic Attack Ltd in 2004 in order to market the product. OceanSolution is marketed in the UK by Ocean Grown. Tonic Attack was originally marketed in the UK by Ocean Grown. In October 2005 Tonic Attack Ltd took over the marketing of the Tonic Attack brand.

Legislative provisions

Section 30 of VATA provides as follows:

30 zero-rating

(1) Where a taxable person supplies goods or services and the supply is zero-rated, then, whether or not VAT would be chargeable on the supply apart from this section –

(a) no VAT shall be charged on the supply; but

(b) it shall in all other respects be treated as a taxable supply;

and accordingly the rate at which VAT is treated as charged on the supply shall be nil.

(2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the supply is of a description for the time being so specified.

VAT 1994 Schedule 8, Group 1 – food, provides as follows (insofar as is material):

The supply of any thing comprised in the general items set out below (is zero-rated), except –

…

(b) a supply of any thing comprised in any of the excepted items set out below …

General items

Item No.

(1) Food of a kind used for human consumption.

…

Excepted items

Item No.

…

(3) Beverages chargeable with any duty of excise specifically charged on spirits, beer, wine or made-wine and preparations thereof.

(4) Other beverages (including fruit juices and bottled waters) and syrups, concentrates, essences, powders, crystals or other products for the preparation of beverages.

…

Notes:

(1) "food" includes drink.

The evidence

Several agreed bundles were provided for the Tribunal, and in addition we were provided with a bottle of Tonic Attack to sample. We heard oral evidence from Mr Oliver Dowding and from Professor Sean Strain, BSc, BAgr, PhD, DipEd (TAFE), Reg Nutr, MRIA on behalf of the Appellant. Professor Strain is director of the Northern Ireland Centre for Food and Health and Professor of Human Nutrition at the University of Ulster.

Wheatgrass juice is a liquid food consisting solely of the liquidised leaves and part of the roots of the wheat plant. In this case the plant is grown with no root medium but is grown in a solution which is created artificially by diluting a proprietary and patented product called "OceanSolution".

Wheatgrass takes about nine days to grow and reaches a height of about six inches. At that stage the leaves are cut off from the root mat and some of the root mat is put together with the leaves into a slow-speed juicer. The product is then bottled immediately and refrigerated prior to despatch. The texture of the product is that of a slightly thickened liquid, not unlike re-constituted orange juice. It smells like cut grass and tastes as one might imagine cut grass tastes, except that it is very sweet. We sampled the juice and found it quite unpleasant, and not the sort of thing that one might want to take in any great quantity.

We were given a number of different analyses of the product. They varied quite a lot, but according to Professor Strain the variations were not significant. We take the analysis of the macronutrient content of wheatgrass from that supplied to Professor Strain by Ocean Grown Ltd. He drew up a comparative table showing the macronutrient content for orange juice, carrot juice and tomato juice as well as wheatgrass which is as follows:

Water	Protein	Total fat	Carbohydrate	Total sugars	Energy
(g)	(g)	(g)	(g)	(g)	(kcal)

Wheatgrass	95.9	3.1	0.1	0.4	ND	14
Orange juice	89.2	0.5	0.1	8.8	8.8	36
Carrot juice	91.7	0.5	0.1	5.7	5.7	23
Tomato juice	93.8	0.8	Trace	3.0	3.0	14

ND: not determined

Professor Strain has a very impressive list of qualifications and a considerable amount of relevant experience. He is a member of a large number of committees and organisations concerned with nutrition. We do not propose to detail these here. He was asked by those acting for Ocean Grown the following question: "What is the nutritional value of the product? Does it provide more nutrition than fruit juices or vegetable juices?" His reply was, in part, as follows:

"The micronutrient (vitamin and mineral) content of the products (and wheatgrass) vary a little but, in general, are quite similar (data not shown). Although wheatgrass is a young plant of the genus Caroline, and quite distinct botanically from the fruit and vegetable juices selected, a comparison of wheatgrass with these juices is more relevant than with other standard-rated beverages, such as carbonated drinks and cordials, which generally contain sweeteners or flavourings and little else. From the table it is obvious that the major differences between wheatgrass and the other juices are the much higher protein content and the much lower carbohydrate content of wheatgrass. These are important nutritional differences with respect to the physiological effects these juices have in the body as will be illustrated in the answers to further questions below. Perhaps the best answer to the second part of the current question is that wheatgrass provides different micronutrients (nutrition) than fruit and vegetable juices rather than `more nutrition'."

The relevance of the higher protein content is according to Professor Strain that "the protein in wheatgrass juice will coagulate in the stomach and pass slowly into the small intestine where it will stimulate further secretions and slow the rate of transit in the upper part of the digestion tract so that the protein can be broken down into amino acid constituents and absorbed. Unlike fruit or vegetable juices (major nutrients being sugars) which will be readily absorbed, wheatgrass juice (major nutrient being protein) will be broken down more slowly in the digestive tract before the constituents can be absorbed into the blood stream." Owing to the much lower carbohydrate and sugar content, wheatgrass juice will not give the same stimulus to the metabolism of the body as fruit or vegetable juices because the nutrients in wheatgrass juice would be assimilated more slowly. Professor Strain compared wheatgrass juice to milk in its protein content.

The protein content of the product is greater than that of milk and most soups. For example vegetable soup would have 1.5 grammes of protein per 100 mls, cream of mushroom soup would have 1.1 grams, and chicken would have 1.3 to 1.5 grammes. Lentil soup would be higher at 4.4 grammes. Professor Strain had been unable to find any beverage, such as smoothies, on the market which had more than 0.8 grammes of protein. The nutritional content of such drinks varied very little.

A laboratory analysis of the micronutrients Tonic Attack shows that it contains calcium, iron, magnesium, potassium, vitamin A, vitamin B complex, vitamin E, chlorophyll and super oxide dismutase (an enzyme). Professor Strain had insisted that an analysis was done by a UK credited laboratory, and he explained the small differences which there were in the three different analyses produced as being more likely to be caused by differences in the product samples, such as the age of the wheatgrass or the processing. He did not consider any of the differences were significant. The samples here varied between the protein content of 3.1 to 4.1 grammes. Such differences as there were in the protein content showed that wheatgrass had a protein content greater than Professor Strain would expect in any beverage, including milk and most soup. Professor Strain gave the difference between a "smoothie" and a fruit juice as being the greater amount of soluble dietary fibre contained in the former, with more flesh or pulp present. Whilst one would consume less of a smoothie than fruit juice to feel full, it would have a different nutritional content from the wheatgrass. In his opinion all other beverages made from fruit or vegetable matter varied very little in their nutritional content. The reason that the wheatgrass drink would give a greater feeling of fullness than smoothies or other fruit drink is that the soluble fibre in the wheatgrass would form a layer in the small intestine which would flow the digestion process, as would milk. Fruit smoothies act on the small intestines whereas wheatgrass and milk act on the stomach.

The recommended daily consumption of wheatgrass juice is given on the bottle as 28-56 mils/1-2 fl. oz. Mr Dowding and some of the people who had contacted Mr Dowding via the internet would take more. Mr Dowding himself as a daily routine had three times 30 mils for breakfast together with a small quantity of fruit. However, we think it unlikely that many people would want to take more than the recommended quantity. Professor Strain's answer to a question as to whether drinking the product actually hydrated the body and to what extent was as follows:

"The product contains a similar amount of water as fruit or vegetable juices and would, theoretically, be able to hydrate the body. Nevertheless, if the aforementioned taxpayer was broadminded enough to drink more than the recommended daily dose, the wheatgrass product would soon give a greater feeling of fullness (and possibly nausea!) than fruit or vegetable juices or other beverages. This effect would be owing to the different way the protein is processed in the digestive tract compared with sugars. It is well known that protein is the most appetite satisfying of the macronutrients in food."

We share Professor Strain's opinion that, whilst the product is technically capable of increasing bodily liquid levels and slaking thirst, it would be very difficult to quench more than a minor thirst. The taste is very powerful and, in our opinion, not pleasant. We acknowledge, however, that there were testimonials produced by Mr Dowding from people who appeared to find it pleasant. It would be possible to render it more palatable by combining it with other juices, as apparently some people do.

Professor Strain did not accept that there were health benefits to be gained from taking the wheatgrass beyond any placebo effect. He did not consider there would be any immediate stimulus from the wheatgrass such as would be obtained from a fruit juice because of its low sugar content, those with low blood sugar would not find it raised quickly by the wheatgrass.

The bottle itself is about the size of those glass bottles in which you can buy tomato juice. Indeed the consistency is not unlike that of tomato juice though possibly somewhat thinner. The product has a shelf life of twelve days. On the label it is advised to take the product on an empty stomach. A label on the front of the bottle says `Tonic Attack!' and the next line, in smaller print, says `Health in a bottle'. The appearance given is more that of a sauce or of something such as tomato ketchup that one might add to a soup or stew rather than a drink. One bottle contains 237 mils/8 ounces of the product, and costs £11.00 per bottle with £2.00 shipping cost added on. It has a recommended shelf life of 14 days. The product is sold predominantly over the Internet.

It was Mr Dowding's evidence that the product was drunk as a fortifiant. It was bought for its perceived health and vitality benefit, but he was restricted from making claims about its health benefits by the Advertising Standards Authority. In his witness statement Mr Dowding listed the following range of ailments and health issues for which people have taken wheatgrass: acne, anaemia, arthritis, asthma, bladder problems, blood pressure, problems, cancer, circulation, colitis, constipation, eye problems, fatigue, hay fever, hair loss, hypoglycaemia, impotence, kidneys, liver, lung problems, nervous system, premature ageing, skin problems and ulcers. There is evidence produced in the form of testimonials and articles which appear on the website which make reference to it being taken for a variety of conditions, but there is no proper scientific evidence of its having any curative capabilities. We prefer Professor Strain's opinion that, whilst there is no scientific reason for believing that Tonic Attack would have significant health benefits, it is not possible to dismiss all the claims, since the placebo effect can be very strong.

The merchandising has not been extensive, the product being sold only over the Internet where it is described as a juice. Promotional material on the website refers to `healthy longevity of life', and to wheatgrass juice as `probably the most complete nutritional drink available'. It states that wheatgrass has `over 100 key nutritional elements needed by humans'. It also states: `wheatgrass juice in the human diet prevents or limits many ailments … It improves digestion and is loaded with enzymes. Organic minerals found in wheatgrass juice are more easily absorbed and, utilised by the body than synthetic pill forms.' In addition various testimonials from customers are displayed. Oliver Dowding in documents available on the website recommends taking 30ml a day as part of a regular dietary regime. An advertisement for Tonic Attack to be placed in The Spectator describes it as being `Power packed nutrition, restores energy and health', and the editor is requested to place it in the Health section of the magazine.

The Appellant's case

The Appellant's principal contention is that Tonic Attack is not a beverage and is food of a kind used for human consumption. It was submitted that the word "beverage" is to be given its ordinary meaning, and what is relevant is the view of the ordinary man in the street as to the nature of the product. The Tribunal was referred to the case of Bioconcepts Ltd (VAT Decision 11287). In that case the tribunal stated as follows in relation to the meaning of "beverage" (in the context of the VATA 1983 Schedule 5 Group 1, item No.1):

"It seems to us that notwithstanding the Oxford English Dictionary of (stet) `beverage' meaning drink, it is not used in the sense as meaning all drinkable liquids. Its meaning in ordinary usage covers drinks or `liquors' that are commonly consumed. This is the primary meaning in the Oxford English Dictionary. Liquids that are commonly consumed are those that are characteristically taken to increase bodily liquid levels, to slake the thirst, to fortify or to give pleasure."

The Tribunal was also referred to the Commissioners' Notice 701/14/02 (May 2002), para 3.7 which provides:

"3.7 Drinks

Although most drinks (other than medicinal drinks) are considered to fall within the general category of `food' for VAT purposes, many drinks are standard-rated as alcoholic or non-alcoholic beverages. For VAT purposes, a beverage is –

`A liquid commonly consumed to increase bodily liquid levels, to slake thirst, to fortify or to give pleasure.'"

This Notice remains in force and the wording is clearly taken from the Bioconcepts case cited above. The Tribunal was referred to the case of Kalron Foods Ltd v HMRC [2007] STC 1100 where at paragraph 60 it was said that the case of Bioconcepts was not to be read as "laying down an exhaustive definition of what a beverage is", but rather as "listing common characteristics of a beverage not all of which need to be present in any particular case."

The Bioconcepts test was recently approved in the case of Unilever Best Foods UK Ltd (VAT decision 20016) and the tribunal clarified it further as follows:

"28. In parenthesis, the purpose of the tribunal in Bioconcepts of including `to fortify' as an example of a liquid characteristically consumed as (a drink) and consequently (a beverage) was to recognise as beverages liquid products taken to enhance energy."

In the present case the Appellant does not seek to draw any distinction between a "drink" and a "beverage".

It is the Appellant's case that the Notice and the case of Bioconcepts set out clear criteria which are not satisfied in the case of Tonic Attack. The liquid is not consumed to slake thirst or to increase liquid levels; it is not taken to fortify nor to enhance energy. Similarly it is not a liquid characteristically consumed for pleasure, it is not enough that some people like the taste. The man in the street would not say that he would take it for pleasure, he would consume it for general nutrition as part of a diet. In the marketing the emphasis is on nutrition, and that Tonic Attack is a super food with various perceived benefits, and it is consumed as a shot. The claimed benefits are the only reason why a person might contemplate consuming it, not to slake thirst or fortify or to give pleasure. It is an acquired taste, consumed to promote general well being.

The Respondents' case

The Respondents did not rely on the test in the case of Bioconcepts. Mr Bates submitted that the relevant authority was Kalron Foods and the Tribunal was referred to paragraph 60 at which Warren J said:

"One sees the phrase `taken to increase bodily liquid levels, to slake thirst, to fortify or to give pleasure` repeated in other cases and it appears also in para 3.7 of VAT Notice 701/14/02 (May 2002) already referred to. It is, however, important to see how that meaning was adopted and applied in the context of the facts of Bioconcepts to understand just why the liquid in that case was not a beverage. I will be surprised if the tribunal had thought it was laying down an exhaustive definition of what a beverage is rather than listing common characteristics of a beverage not all of which needed to be present in any particular case. I do not consider that the tribunal can be taken to have ruled out other drinks not having any of those characteristics from being considered a beverage."

It was submitted that the key principles to be gleaned from Warren J's judgment in the case of Kalron are as follows:

(i) The burden of proving that the product is not a "beverage" rests with the Appellant taxpayer.

(ii) Whether or not the product is a "beverage" is a question of fact to be decided in each case.

(iii) The word "beverage" is to be given its ordinary meaning. The Oxford English Dictionary defines "beverage" as "a drink". While it is true that not every drinkable liquid is a "beverage" (for example, soup is not a "beverage"), "caution must be exercised in placing major reliance on any supposed distinction between drinks and beverages" (50, 58, 68).

(iv) Consideration of a list of factors which the appellant in Kalron produced (paragraph 71) may well be of assistance to the tribunal, but that list is not exhaustive. The ultimate question is always one of fact: is the product under consideration a beverage? (Paragraphs 73, 76).

(v) The phrase in paragraph 3.7 of VAT Notice 701/14/02 is not to be treated as ruling out other drinks having those characteristics from being considered a beverage (paragraph 60 supra).

(vi) The case of Kalron shows that a product can be regarded as a beverage even if it can also be consumed as a food.

It was the Respondents' case that beverages come in all tastes and sizes, and includes some (such as beer and wine) which are typically consumed only in reasonably large quantities (pint or glass) and others (such as vodka, brandy, gin and rum) which are typically consumed in `shorts' or other small measures, and are usually consumed mixed with other drinks. There is also a great variety of non-alcoholic beverages, Coca cola being very different from a smoothie, both in terms of nutritional and health benefits and in terms of how much each of these beverages can comfortably be consumed.

The Appellant's own description in a letter from Mr Dowding dated 29 November 2005 described the product as "a health drink of wheatgrass juice", a description which is consistent with the products being regarded as a beverage. The Commissioners relied on the product's intrinsic form and nature, as well as its appearance and the way in which it is marketed and sold. It has the consistency of a thin liquid, it is marketed as a "juice", it is designed to be drunk (rather than eaten) and can be drunk on its own or mixed with other drinks, and it is sold alongside other drinks in juice bars. In addition it can be drunk as part of a cocktail of juices, and like other juices has some nutritional value. It cannot be marketed as a meal replacement product since it cannot satisfy the requirements of the relevant regulations (The Foods Intended For Use and Energy Restricted Diets for Weight Reduction Regulations 1997 (SI 1997/2182)).

It was submitted that it was neither necessary nor desirable for the Tribunal to decide whether the Appellant's wheatgrass juice does, in fact, have the health-giving and nutritional properties which the Appellant claims for it. It is common ground that the product is bought and consumed for those supposed properties. That is the purpose of a "health drink"; but it is nevertheless a drink, rather than a soup or pharmaceutical product.

It was not accepted by the Commissioners that Tonic Attack was in the nature of a medicinal product which could only be consumed in small fixed dosages. The quantity which the individual consumes is considered to be a matter of personal taste and preference. Alcohol also is consumed in small quantities in any event.

In considering whether or not Tonic Attack is a `fortifiant' the Tribunal must look at first of all what people think it does, and secondly what the marketing literature says that it does, any scientific evidence is completely irrelevant.

Reasons for decision

Whilst we regard the case of Kalron as being the leading authority on the principles by which a court has to determine whether or not a particular liquid product is a "beverage" or not, in his judgment Warren J made clear that whether or not a product is a "beverage" is a question of fact to be decided in each case (see paragraph 76 of his judgment cited below at paragraph 40). He does not rule out being guided by the description of "beverages" as being liquids "taken to increase bodily liquid levels, to slake thirst, to fortify or to give pleasure", but says that other drinks not having any of those characteristics should not be ruled out from being considered a beverage.

In the present case, having both seen and consumed Tonic Attack, we have no hesitation in deciding that nobody would take it to increase bodily liquid levels or to slake thirst. It is simply not the type of product that anybody would drink in any quantity, and, of course, to slake thirst necessarily implies drinking a certain quantity of liquid. The recommended dose of one to two ounces (28-56 mil) daily indicates this, and although in the letters reproduced on Tonic Attack's website there is reference to people consuming larger quantities in a day, there is no question that that is abnormal and is not either how it is sold, or how anybody viewing the product on the shelf would consider purchasing it. It is also the case that the price of Tonic Attack is itself likely to inhibit people from drinking it in large quantities. For the same reason that one would not take it in sufficient quantities to slake thirst, similarly it would not, in our view, be taken in sufficient quantities to fortify. Whether or not people would take it for pleasure is, of course, a subjective matter, however, neither of the members of the Tribunal would take it for pleasure, and it seems highly unlikely that people would choose to drink it for pleasure.

At paragraph 73 in Kalron Warren J, having referred to a list of factors advanced by the taxpayer for determining whether a drinkable liquid is also a "beverage" said:

"It may very well be that consideration of the factors which Mr Thomas identifies may assist the tribunal in deciding whether a product is a beverage or not. However, it may not, in any given case, be necessary to consider all the factors because it is clear, without detailed analysis, that a product either is or is not a beverage. Further, the criteria which Mr Thomas puts forward may not be exhaustive: there may be a case where some other criterion is of importance too. It is not possible to be prescriptive in a way which he suggests."

At paragraph 76 he continued:

"As any sort of formal test, Mr Thomas' approach is, I think, just the sort of over-elaboration which Lord Woolf cautioned against in Ferrero UK. That is not to say that the factors which he identified are not ones which should ordinarily be drawn to the attention of the tribunal or which they should have in mind. But the ultimate question is always the question of fact: is the product under consideration a beverage?"

We were impressed by Professor Strain's evidence and his stressing the importance of the protein content with regard to the distinction to be drawn between Tonic Attack and smoothies or other drinks made from vegetables or fruits. In our view Tonic Attack is to be distinguished from such products. Whilst it is in a bottle which is the size of a regular smoothie, its price is considerably more. The appearance of the bottle is far more akin to that of a product which might be found amongst the sauces in a supermarket, to be used in addition to other products. It does not have the appearance of something which one would readily wish to drink on its own. We should emphasise that we do not consider that this product should be distinguished from any other wheatgrass juice, despite the claim for it that, because it is grown hydroponically, using diluted ocean water, it is significantly different from other wheatgrass juices.

An important factor is the way Tonic Attack is marketed. This is solely by means of the Internet or advertisements such as the one to be placed in the Health section of the Spectator magazine. Potential purchasers would be people who are concerned with the health benefits of the product, not with its ability to quench thirst. It is not on display in supermarkets. The only other outlet is in Juice Bars where it may be consumed on its own or with various fruit or vegetable juices. Again we consider the type of person most likely to buy it is one concerned with its purported health-giving properties.

Although in Kalron we are told to consider that other characteristics might also define a beverage, it does seem to us that there are no characteristics of this product by which it can properly be deemed to be a beverage, beyond the fact that it is a liquid. In our opinion it is far more akin to a medicinal liquid, and, indeed, the marketing is aimed at stressing its supposed health benefits, whilst not making specific claims. The only reason such claims are not spelled out is because the Advertising Standards Authority would not allow them in the absence of firm scientific evidence.

Having considered all the salient characteristics of Tonic Attack we are persuaded that it is not a beverage and is therefore exempt from VAT. In those circumstances this appeal is allowed and the Appellant is awarded its costs.

MISS J C GORT

CHAIRMAN

RELEASED: 31 January 2008

LON 2006/1051