VAT CASES - 07.07.2020

Truffle balls are standard-rated as confectionery

The case. Corte Diletto UK Ltd (CD) sold healthy truffle balls, which were originally marketed as “Nouri Truffles” and then became “Nouri Healthy Balls” . They are vegan based, gluten free and “healthy but indulgent” .

They contain natural sugar but no added sugar and measured about 3cm across. CD claimed that the products should be zero-rated as a healthy fruit-based snack that could be a substitute for a dessert. The director also claimed that they met the definition of a zero-rated cake.

The law. The legislation on VAT and food has always caused confusion. This is because there are specific items that are zero-rated but then a list of exceptions that are standard-rated. And then to further complicate issues, there are exceptions to the exceptions. For example, a biscuit is zero-rated but taxable if it is partly or fully covered in chocolate. But a chocolate-covered product can be a zero-rated cake, as established in the infamous Jaffa Cake case.

In this case the argument CD tried to make was that the balls were not “confectionery” but merely “food”. If it transpired that they were not, the secondary argument was that the zero-rated cake definition should apply.

The decision. HMRC’s view was that the balls are standard-rated as confectionery, due to their size, appearance, packaging, taste and the way they are marketed. The judge agreed, concluding that they would be classed as confectionery by “the man in the street.” The argument that they qualified as a cake was also rejected.

Key points.If you run a food or catering business, it’s often worthwhile taking professional advice to check you are getting the VAT right on your sales. Alternatively, have a detailed review of HMRC’s two main public notices. The difficulty for CD was that the balls specifically met one of the definitions of standard-rated confectionery in the notes to the legislation, namely that it was an “item of sweetened prepared food which is normally eaten with the fingers”.

Corte Diletto UK Ltd v HMRC [2020] TC07570

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