VAT on Food and Drink

In 2024 we saw a lot of legal cases that examined the VAT rating of food and drink and it appears this trend is continuing into 2025! The VAT rating of food and drink has always been a contentious topic but in the case of Global By Nature Ltd v HMRC (TC09396) we can see the first time that a tribunal or court has examined the VAT law covering ‘sports drinks’.

VAT legislation allows food and drink (other than catering) to be zero-rated but there is quite a long list of foods and drinks that are exceptions to the zero-rating and so are subject to VAT at 20%. One such exception is “Sports drinks that are advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk” and this includes powders or syrups that are used to make such drinks.

In the Tribunal, HMRC argued that the above legal wording provides a definition of ‘sports drinks’, in that they are drinks that are “advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk”. They said that Global By Nature Ltd’s drink powders were sports drinks, they were marketed as such, and were standard rated.

Global by Nature Ltd (GBN) argued that their powders, whilst intended to be consumed as a drink, were not ‘sports drinks’ and, even if they were, they were not marketed as such.

The Tribunal agreed with GBN in that two tests should be used to determine whether a product met the conditions in the legislation:

·       Is the product a sports drink?

·       If so, is it advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk?

‘Sports drink’ is not defined anywhere in law, so after examining various dictionary definitions and uses of the phrase, the tribunal decided that GBN’s powders did not contain enough carbohydrate to be considered sports drinks. As they were not sports drinks, how they were advertised or marketed did not need to be considered – they did not fall within the exception and could be zero rated.