Work examples

VAT Manufacturing Case Study

Sean Turner

Sean Turner – VAT Specialist

The VAT team at Menzies was approached by a well-known food manufacturer concerning a new snack product being developed. The difficulty that the manufacturer faced was that the VAT rules for food products are highly complex.

VAT for food products

Whilst most food products are subject to the zero rate of VAT, there are numerous exceptions, where standard rate VAT applies. The product being developed was unlike other products on the market, which meant that the VAT treatment was far from clear. With approximately £300,000 per annum of VAT at stake, they asked for our help in determining how sales of the new product should be treated for VAT purposes, as this was a critical issue for the business.

Our #BrighterThinking approach

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The VAT team studied the ingredients and manufacturing processes of the product, alongside packaging design and prototype photographs for appearance and size. Competitor products were researched, including visiting supermarkets to check where and how similar products were made available for sale and how they were branded and packaged. The market at which the product was aimed and how and when the product was designed to be eaten was also investigated.

Once all practical points had been assessed, the team applied the legislation and reviewed relevant VAT case law and guidance to determine whether a case for zero rating was possible. In essence, the conclusion would ultimately hinge on what the ‘man in the street’ believed he was consuming, but supported by VAT law. A detailed clearance application was put together outlining all the arguments, which was submitted to HMRC with a detailed package of information.

The outcome

The case was reviewed by policy specialists at HMRC, which included testing samples of the product. A positive ruling was received confirming zero rating for the new product, which was a great result for our client. This project demonstrates a combination of the VAT team’s technical expertise, as well as practical application, being used in order to understand the client’s business and products and the ability to secure an excellent result for our clients.

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Posted in Work examples, Manufacturing