“It’s crazy,” says Innocent chief executive Richard Reed. “This ruling is definitely not in the interests of the nation’s health. It’s absurd that smoothies, which contain two portions of fruit and help people live more heathily are subject to VAT when junk food like burgers, chips and doughnuts are sold tax free.”
Yep, Richard. Not many of us will disagree with you there – unless of course we work for Her Majesty’s Revenue and Customs (HMRC) or the Treasury, which is slavishly serves.
Reed’s anguish and ire stem from a three-year legal wrangle over whether Innocent – and its customers – should continue to pay 17.5% VAT on its smoothie products, which it has just lost.
Reed chooses to classify smoothies as “liquified fruit salad.” It’s an oddity of our tax rules that, while people in this country need pay no VAT on “essential foods” such as the aforementioned burgers, “luxuries”, such as smoothies, are not exempt. But even if smoothies are categorised as a “beverage” (which, in all honesty, they more commonly are), Reed would still be in trouble with the tax authorities. Beverages – which for tax purposes are defined as “liquid commonly consumed to increase bodily liquid levels, to slake thirst, to fortify or to give pleasure” – are non-exempt. Unless they happen to be milk, tea or hot chocolate.
Where’s the fairness in that you, like Reed, might ask? Fairness, sadly, is not in the rule-book of an institution which joyfully plunders our just earnings, without so much as an apology when it is caught in the act. Its instinctive reaction on those rare occasions when it suffers a legal reverse is to vindictively rewrite the law in its own favour – lest future appellants succeed in pulling the same stroke.
This, apparently, is how the current eccentric definition of exempt and non-exempt beverages came about in the first place. It dates to a tax tribunal case in 1993, when HMRC (then Customs and Excise) was thwarted in its attempt to impose VAT on slimming aid Bio-Light.
Someone really should push Health Secretary Andrew Lansley a little harder. It’s time this government did more joined-up thinking on food policy, and Lansley leaning on George Osborne at the Treasury is where they should start. There is an inherent contradiction in the DoH’s position. On the one hand, it seems to expect the food industry to pour infinite resource into propagating healthy eating. And on the other, it lifts not a finger to criticise another department of state when it actively undermines that goal by reinforcing an out-of-date and absurd tax regime, with a view to screwing every last penny out of the consumer.