In Nestle UK v HMRC [2016] UKFTT 158 (22 February 2016) the FTT found that fruit flavoured powders consumed with milk were not zero-rated.
Nestle had made a repayment claim in relation to its supply of Nesquik strawberry and banana flavoured powders on the basis that these supplies were zero-rated as supplies of “food of a kind used for human consumption” (VATA Sch 8 Group 1).
HMRC argued however that the powders fell within the excepted item 4 as a ‘powders for the preparation of beverages’. Nestle counter-argued that ‘beverages’ excluded ‘milk and preparations and extracts thereof’ (item 6 overriding the exceptions) and that the powders were for adding to milk to be consumed as a milk drink. In any event adding the powders to milk did not create a ‘beverage’ but merely flavoured the milk.
The FTT rejected Nestle’s contention that the term ‘beverages’ in excepted item...
