Innocent's loss after tribunal ruling

THE INNOCENT drinks company has been told to pay HM Revenue & Customs legal costs following a dispute over whether fruit smoothies were considered beverages.

In the original ruling, presiding judge Mrs B Mosedale, found that smoothies should be considered as beverages and therefore be liable for VAT. In her summing up of the case in October 2010, Mosedale said: "The fact that they were also food because of their snack-like properties did not take them out of the category of beverage...They were intended, and sold, as a drink, and were pleasant and easy to drink. It was socially acceptable to consume a smoothie in place of beverages such as tea, coffee or fruit juice."

In June this year, HMRC applied for costs to be awarded as well as the tax due, which Mosedale granted and the judgment of which has been published this week. the value of the costs has not been revealed.

The original case was filed before the new tribunal rules came into place. Innocent claims that a parliamentary statement from 1978, the Sheldom statement, said that HMRC would not push for costs with the exception of "substantial and complex cases where large costs are involved and which are comparable to High Court cases".

Innocent claimed that this was a simple case, answering one question. The judge noted that this was a reversal from its position in the original hearing, which was that this was a complex case. Mosedale noted that the sums involved - £27m - in itself made this comparable to a High Court case.