VAT on Snack Products
by Kevin Hurley
VAT on Snack products is an increasingly borderline area. The increase in various types of snack products, particularly targeting the tastes of the health conscious consumer, has led to uncertainty surrounding the VAT rates on many types of these new products. A vast range of healthy snack products have been developed in recent years, and these may be viewed by Revenue authorities as VATable products considered either confectionery, or savoury snacks, and as such liable to VAT at the highest rate.
The confusion can be compounded by lack of clear guidance and even conflicting guidance in some cases. For example, HMRC in the United Kingdom state in VAT Notice 701/14 that dried fruit held out for sale as a snack is liable to 20% VAT whereas in the HMRC VAT on food guidance manual VFOOD7020 it states that dried fruit that is naturally sweet will not be regarded as confectionery and thus is zero-rated. It is therefore always advisable for manufacturers to write to HMRC to confirm the liability of their product. CKH Fiscal Services handles many such cases and we can advise from the outset what the potential risks are at having your product incorrectly classified. Many factors come into consideration including packaging, manufacturing process, marketing, placement in store, and so on. Just one minor error in any of these factors can result in your product being liable at the highest rate of VAT while your competition is permitted to sell at a lower VAT rate because they market their product slightly differently.
Ireland is a much smaller market than the UK and even less guidance is available for manufacturers to determine the correct VAT rate on their products. Again, contradictory guidance is also published. An example is where Revenue state that Poppadoms are liable to 23% VAT in their VAT on Food and Drink guidance whereas they are rated 13.5% on the published entry for Poppadoms on Revenue's VAT Rate Index. Again, manufacturers are advised to confirm the correct VAT rate with Revenue and expert advice should be sought in the first instance.
Retailers and Distributors alike should also satisfy themselves that the correct VAT rate is being charged. VAT is a self-assessment tax and traders are responsible for ensuring they are charging the correct VAT rate. An invoice from a supplier displaying an incorrect VAT rate is no defence in the eyes of the authorities and assessments will be raised accordingly. CKH Fiscal Services generally advise our clients to ensure their supplier has written confirmation of a reduced or zero VAT rate from revenue authorities if supplying such products to avoid potential liabilities, interest and penalties. In some cases, this may not always be possible for imported products and we can assist in ensuring you are charging the correct rate.
CKH Fiscal Services is one of the leading agencies in advising the food industry in Ireland and the United Kingdom on VAT rates on food. The ideal time for us to become involved in any product is at the NPD stage where we can advise what VAT rate will apply to the product and highlight any potential marketing mistakes that will push your product from one VAT category into another. For further information call Kevin Hurley on 087-9535873 or 01-8600444.
VAT on Snack products is an increasingly borderline area. The increase in various types of snack products, particularly targeting the tastes of the health conscious consumer, has led to uncertainty surrounding the VAT rates on many types of these new products. A vast range of healthy snack products have been developed in recent years, and these may be viewed by Revenue authorities as VATable products considered either confectionery, or savoury snacks, and as such liable to VAT at the highest rate.
The confusion can be compounded by lack of clear guidance and even conflicting guidance in some cases. For example, HMRC in the United Kingdom state in VAT Notice 701/14 that dried fruit held out for sale as a snack is liable to 20% VAT whereas in the HMRC VAT on food guidance manual VFOOD7020 it states that dried fruit that is naturally sweet will not be regarded as confectionery and thus is zero-rated. It is therefore always advisable for manufacturers to write to HMRC to confirm the liability of their product. CKH Fiscal Services handles many such cases and we can advise from the outset what the potential risks are at having your product incorrectly classified. Many factors come into consideration including packaging, manufacturing process, marketing, placement in store, and so on. Just one minor error in any of these factors can result in your product being liable at the highest rate of VAT while your competition is permitted to sell at a lower VAT rate because they market their product slightly differently.
Ireland is a much smaller market than the UK and even less guidance is available for manufacturers to determine the correct VAT rate on their products. Again, contradictory guidance is also published. An example is where Revenue state that Poppadoms are liable to 23% VAT in their VAT on Food and Drink guidance whereas they are rated 13.5% on the published entry for Poppadoms on Revenue's VAT Rate Index. Again, manufacturers are advised to confirm the correct VAT rate with Revenue and expert advice should be sought in the first instance.
Retailers and Distributors alike should also satisfy themselves that the correct VAT rate is being charged. VAT is a self-assessment tax and traders are responsible for ensuring they are charging the correct VAT rate. An invoice from a supplier displaying an incorrect VAT rate is no defence in the eyes of the authorities and assessments will be raised accordingly. CKH Fiscal Services generally advise our clients to ensure their supplier has written confirmation of a reduced or zero VAT rate from revenue authorities if supplying such products to avoid potential liabilities, interest and penalties. In some cases, this may not always be possible for imported products and we can assist in ensuring you are charging the correct rate.
CKH Fiscal Services is one of the leading agencies in advising the food industry in Ireland and the United Kingdom on VAT rates on food. The ideal time for us to become involved in any product is at the NPD stage where we can advise what VAT rate will apply to the product and highlight any potential marketing mistakes that will push your product from one VAT category into another. For further information call Kevin Hurley on 087-9535873 or 01-8600444.