TC09095 - [2024] UKFTT 00181 (TC)

Section 30(2) VATA provides that the goods or services of a description for the time being specified in Schedule 8 are zero rated. Group 1 of Schedule 8 provides that zero-rating applies to:

“The supply of anything comprised in the general items set out below, except… a supply of anything comprised in any of the excepted items set out below …”

The first of the general items is “Food of a kind used for human consumption”.

Item 2 of the excepted items is:

“Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.”

Note 5 to Group 1 states:

“…for the purposes of item 2 of the excepted items ‘confectionery’ includes chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.”

In the hearing before the original FTT, HMRC had contended that the Products were items of sweetened prepared food which is normally eaten with the fingers and thus deemed to be confectionery by Note 5 to Group 1 of Schedule 8 VATA. In the First Decision, the FTT held that, in order to be deemed to be confectionery by Note 5, some sweetening must be added to an item and inherent sweetness is not enough. The UT held that the FTT had been correct to hold that “sweetened” in Note 5 does not include items that are inherently sweet but refers to products to which sweetness has been added. In the hearing before us, Mr Watkinson confirmed that HMRC no longer relied on Note 5.

Ms Sloane referred to Note 5 as a deeming provision which, for example, deemed “drained, glacé or crystallised fruits” to be confectionery. We do not think that it is entirely accurate to describe Note 5 as a deeming provision. The purpose of Note 5 is to clarify the meaning of ‘confectionery’ and to provide certainty where there might be some doubt about whether an item should be classified as confectionery (as in the case of “drained, glacé or crystallised fruits” – see Candy Maid Confections Ltd v Customs and Excise [1968] 3 All ER 773 at 777E). Note 5 only operates as a deeming provision insofar as an item which it states is included in the term would not ordinarily fall within ‘confectionery’. It is obviously incorrect to say that all the items listed in Note 5 would fall outside the term ‘confectionery’ without the note. We consider that it is clear, for example, that sweets and chocolates would be regarded as ‘confectionery’ even without Note 5.

This view of Note 5 is supported by the discussion by the authors of Bennion, Bailey and Norbury on Statutory Interpretation (8^th edn) of inclusive and exclusive definitions at section 18.3 which they summarise as follows:

“(1)

An inclusive definition modifies the natural meaning of the defined term by enlarging it or clarifying potential doubt about what is covered. This kind of definition typically takes the form ‘X includes.’

(2)

An exclusive definition modifies the natural meaning of the defined term by narrowing it or clarifying potential doubt about what is excluded. This kind of definition typically takes the form ‘X does not include’.

(3)

What inclusive and exclusive definitions have in common is that they specify matters that are, or are not, to be treated as caught by the defined term but otherwise leave the natural meaning of the term intact.”

The learned authors refer to HMRC v Premier Foods Ltd [2007] EWHC 3134 (Ch) (‘Premier Foods’), which concerned whether a fruit bar was ‘confectionery’ for the purposes of VAT. In [18] of the judgment, Sir Andrew Morritt C observed that:

“… note (5) provides for the specific inclusion of ‘sweets’. But such specific inclusion cannot lead to the inference that sweets would otherwise be excluded. They are the paradigm of confectionery. Second, it is contrary to the well recognised canon of construction that an enlarging definition does not normally affect the width of the term being enlarged.”