Beverages

Anything charged with excise duty – basically alcoholic drinks – is charged to VAT at the standard rate. The law goes on to say that “other beverages (including fruit juices and bottled waters) and syrups, concentrates, essences, powders, crystals or other products for the preparation of beverages” are chargeable; but there are exceptions for “tea, mate, herbal teas and similar products, and preparations and extracts thereof; cocoa, coffee and chicory and other roasted coffee substitutes, and preparations and extracts thereof; milk and preparations and extracts thereof; and preparations and extracts of meat, yeast or egg”. So Bovril should be all right, as well as cocoa; hot chocolate powder must be an extract of cocoa; chocolate milk is mainly milk. Fizzy drinks are VATable.
Manufactured?
The law used to refer to “manufactured beverages”. This was a rule – charging tax on “soft drinks” – that was brought in for purchase tax in 1962, and preserved for VAT when it was introduced in 1973. Tropicana (UK) Ltd must have seen this as a marketing opportunity, as well as a chance to make more money. They argued that they – unlike many other drinks companies they could name – did not “manufacture” their juice. They picked oranges, squeezed the juice out of them and put it in boxes. They did not concentrate it and then dilute it, they did not mix it with anything else; the only other thing they were required to do was a little light pasteurisation to kill any bugs.
Even though squashing oranges and pasteurising the juice on an industrial scale sounds like manufacture to me, the Tribunal said that it wasn’t. Maybe the Chairman just thought Tropicana was nicer than other juices, and deserved to be zero-rated. Customs adopted the law of the playground – “it’s our ball, we’ll make the rules” – and had the law changed to remove “manufactured”. So now you have to pay VAT on Tropicana as well as on everything else.
Runny food
What’s left is a number of cases about whether something is a beverage – a drink – or “liquid food”. It’s obvious that some food is runny, but you probably wouldn’t drink it as a drink – think custard, think gravy. So it’s possible to argue that something is food and not drink.
One of the first cases on this point involved something called “BIO LIGHT”, which was made by Bioconcepts Ltd. This was a diet aid, sold with instructions to sip it throughout the day to help eliminate the urge to snack. The box said “Do not drink it by the glassful”. A report produced in the Tribunal said “the product's taste is too unpalatable to drink as a beverage, even in diluted form. Even in diluted form, the dominant flavour is aniseed but there is a strongly bitter background which should probably have an emetic effect if diluted BIO-LIGHT were to be consumed by the glassful. A similar effect would be expected if Worcester Sauce or Tabasco were consumed as a beverage.”
The Chairman commented, “Our impression having tasted BIO-LIGHT is similar”. He suggested that a beverage was something “commonly consumed…to increase bodily liquid levels, to slake the thirst, to fortify or to give pleasure”. It seems that BIO-LIGHT was too nasty for any of those. It was a food, not a drink, and it was zero-rated.
A bit more tricky is the distinction between drink and soup. After all, soup is often served in a cup and drunk, rather than eaten with a spoon. Grove Fresh Ltd made fruit juice, which was clearly standard rated because the law is explicit. But then it started to make vegetable juice as well – one variety being mainly tomatoes but including celery and beetroot, and another consisting of carrot, tomato and red pepper juice. It argued that these were dietary supplements or “meal replacements”, or alternatively they were like gazpacho – cold vegetable soup.
This time, the Tribunal chairman said she really enjoyed the samples provided – which was a problem for the company. As the product was nice, it was a beverage. It wasn’t a full meal replacement, even though it might be drunk by someone who was health-conscious. And it simply wasn’t sold as soup. It was a drink, and VAT was due.