RE: VAT Good position…2 Feb 2026 13:22
THG's protein products don't meet the criteria for high carbohydrate sports drinks accordinf to AI. AI view of VAT case...Key Details of the Case:
The Dispute: Global By Nature (GBN) sought repayment of overdeclared VAT on their vegan protein powders, arguing they were zero-rated food. HMRC argued they were standard-rated sports drinks, an exception to zero-rating, under Value Added Tax Act 1994, Schedule 8, Group 1, Excepted Item 4A.
HMRC's Argument: HMRC focused on the marketing of the powders (e.g., for recovery, performance), claiming this made them sports drinks.
FTT's Decision: The Tribunal ruled in favor of GBN, finding that the products had "low to negligible levels of carbohydrate" and didn't meet the criteria to be classified as sports drinks.
The Ruling's Impact: The decision clarified that for a product to be a standard-rated sports drink, it must not only be marketed as such but also possess the inherent characteristics (like sufficient carbohydrate content) of a sports drink, creating a two-pronged test.
Financial Outcome: GBN successfully reclaimed a significant amount of VAT (£798,856), providing financial relief.
Significance for Businesses:
This case provides guidance that if a powdered supplement has low carbohydrate content, it may qualify for zero-rating, even if marketed for athletic purposes.
It highlights a potential tax recovery opportunity for businesses selling similar low-carb products, as HMRC's interpretation of "sports drinks" was challenged and narrowed.
If the product is low carbohydrate it doesn't seem to matter what the advertising says as it doesn't meet the 'two pronged' test criteria of a Sports Drink, that would be high in energy from sugary carbohydrates. THG look to be in a very strong position for a full backdated VAT refund?
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