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Innocent Loses UK VAT Battle

by Robin Pilgrim,, London

29 November 2010

Innocent, the British smoothie manufacturer, is not entitled to a value-added tax (VAT) refund, despite the health benefits its products provide, a tax tribunal has ruled.

In what was seen by some as an audacious move, Innocent claimed that it was unfair that VAT is levied on its 100% fruit juice smoothies, given that fruit, its raw ingredient, is not subject to VAT. The company further argued that whilst its healthy drinks are subject to VAT, junk foods such as burgers and chips, are not.

The dispute first arose in April 2007, when the company, part-owned by Coca-Cola, tried to claim back the VAT on every bottle it had sold over a three year period, arguing that its smoothies are a “liquefied fruit salad”, and thus VAT exempt, and not, as Her Majesty’s Customs and Excise (HMRC) held, a “beverage.”

Innocent’s founder and Chief Executive Richard Reed told the Guardian: "This ruling is definitely not in the interest of the nation's health. It's absurd that smoothies, which contain two portions of fruit and help people live more healthily, are subject to VAT at full rate when junk food like burgers, chips and doughnuts are sold tax free."

Announcing her ruling, tribunal judge Barbara Mosedale said that while a smoothie does have some snack-like properties, "it is drunk as a beverage".

TAGS: court | tax | value added tax (VAT) | law | United Kingdom

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