TaxAdministrationTax the snack policy crumbles

Tax the snack policy crumbles

Fans of Hula Hoops XL applauded raucously this week as Customs & Excise backed down on plans to impose VAT on the popular snack.

Well at least Hula Hoops enthusiasts would have had they known of the rigours United Biscuits, makers of Hula Hoops, has had to undergo.

After much tooing and froing Customs agreed this week that the beloved snack, despite swelling to a new XL size – which is how Customs determines whether VAT is paid on a snack – is exempt from the tax.

United Biscuits objected to Customs’ plans to impose VAT on Hula Hoops XL and appealed.

The key to the puzzle lay in how they are produced and whether they swell during the process.

In the Customs manual food products obtained by the swelling of cereal products they have to be taxed.

United Biscuits admitted that the snack does swell during production but the swelling was incidental to the process and not intentional.

Peter Smallwood, VAT director at Tenon Lathams, the firm observing the case, said: ‘Zero rating applies to many items such as food for human consumption, printed matter and children’s clothing to name a few and there is often a thin dividing line between what is zero rated and what is standard rated.

‘Any business whose supplies may qualify for zero rating should consider their position carefully as rulings from C&E are not always correct.’

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