VAT on Food Supplements: Exposure on past VAT liabilities runs into the tens of millions
By Kevin Hurley
As everyone in the food supplement industry are aware, the Revenue Commissioners released guidance on the 27th December 2018 to apply VAT to all food supplements from the 1st March 2019. After a hard-fought industry campaign by health stores and certain traders, this decision was deferred until the 1st November 2019 to allow the Minister of Finance time to legislate for the application of VAT on such products.
What many in the industry are not aware of are the consequences of Revenue’s narrative on food supplements. Since 2016, Revenue has restricted the 0% VAT rate to basic vitamins, minerals and fish oils, and only where those products carry no health claims on the packaging. Revenue have repeatedly said in their media publications, responses to traders and in the new guidance that the 0% VAT rate only applies to vitamins, minerals and fish oils. This narrative has been repeated in the Dáil by the Minister and in private letters to traders.
As everyone in the industry knows, almost every vitamin and mineral product will have the EFSA authorised health claims printed on the packaging. Therefore, Revenue effectively say that VAT at 23% applies to every food supplement on the market and they maintain that this was always the case.
This has serious consequences for every manufacturer, distributor and retailer of food supplements. Revenue can go back four years and raise assessments for food supplements sold at the 0% VAT rate and have done so in a number of cases, even where traders were selling vitamin products with health claims on the packaging. There are at least two tax appeal cases lodged challenging VAT assessments raised against ordinary food supplements of the type Revenue previously allowed at 0% VAT. The combined amount of VAT in these two cases is over 1 million euro. These cases relate to medium sized traders and their sales of food supplements would be insignificant in comparison to the larger pharmacy distributors and chains.
Make no mistake, if you sell food supplements, you have a VAT liability on your food supplement sales dating back over the past four years. It is time for all traders in the industry to come together and challenge Revenue. The food supplement industry is estimated at 60 million p.a. in Ireland, giving rise to a VAT exposure for the industry of €45 million – an amount sure to hit profits and put many smaller traders out of business.
For more information, contact Phil Costigan of the Irish Health Trade Association on 065 6848911 or Ciaran Hurley of CKH Fiscal Services on 01 8600444.
As everyone in the food supplement industry are aware, the Revenue Commissioners released guidance on the 27th December 2018 to apply VAT to all food supplements from the 1st March 2019. After a hard-fought industry campaign by health stores and certain traders, this decision was deferred until the 1st November 2019 to allow the Minister of Finance time to legislate for the application of VAT on such products.
What many in the industry are not aware of are the consequences of Revenue’s narrative on food supplements. Since 2016, Revenue has restricted the 0% VAT rate to basic vitamins, minerals and fish oils, and only where those products carry no health claims on the packaging. Revenue have repeatedly said in their media publications, responses to traders and in the new guidance that the 0% VAT rate only applies to vitamins, minerals and fish oils. This narrative has been repeated in the Dáil by the Minister and in private letters to traders.
As everyone in the industry knows, almost every vitamin and mineral product will have the EFSA authorised health claims printed on the packaging. Therefore, Revenue effectively say that VAT at 23% applies to every food supplement on the market and they maintain that this was always the case.
This has serious consequences for every manufacturer, distributor and retailer of food supplements. Revenue can go back four years and raise assessments for food supplements sold at the 0% VAT rate and have done so in a number of cases, even where traders were selling vitamin products with health claims on the packaging. There are at least two tax appeal cases lodged challenging VAT assessments raised against ordinary food supplements of the type Revenue previously allowed at 0% VAT. The combined amount of VAT in these two cases is over 1 million euro. These cases relate to medium sized traders and their sales of food supplements would be insignificant in comparison to the larger pharmacy distributors and chains.
Make no mistake, if you sell food supplements, you have a VAT liability on your food supplement sales dating back over the past four years. It is time for all traders in the industry to come together and challenge Revenue. The food supplement industry is estimated at 60 million p.a. in Ireland, giving rise to a VAT exposure for the industry of €45 million – an amount sure to hit profits and put many smaller traders out of business.
For more information, contact Phil Costigan of the Irish Health Trade Association on 065 6848911 or Ciaran Hurley of CKH Fiscal Services on 01 8600444.