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Proof is in the pudding as Frozen Fruit Company fails in its bid for zero VAT

TWO tax judges have ruled that an “All Fruit Frozen Dessert”should have a standard VAT rating, dismissing arguments put forward by two City lawyers that it should have a zero rating, like frozen fruit.

Judges Jonathan Richards and Janet Wilkins judged an appeal involving the Frozen Fruit Company and HMRC after the taxman decided that the fruit desert should have a standard rating as it closely resembles “ice cream, ice lollies, frozen yoghurt and water ices”.

The frozen fruit firm is owned by Michael and Victoria Philippou, two former city lawyers who are trying to capitalize on the smoothie craze that has gripped the UK.
They both argued that their product should be zero-rated as it “consists overwhelmingly of frozen fruit.”

The product in question comes in three different flavours, including Blackberryblue (blackberry and blueberry), Orangeberry (orange and raspberry) and Strawgo (strawberry and Alphonso mango). The main ingredient in the product contained no added sugar, but had a small amount of additive xanthan gum.

The judges stated that it was difficult to fully the judge the situation as no samples of the frozen fruit were brought to the hearing as evidence.

“That was unfortunate as we considered that it would have been helpful for us to experience first-hand matters such as the texture, taste, appearance and presentation of the product,” said Judge Richards in a written ruling.

Instead of tasting the products themselves, the judges used reviews of the product by The Daily Mail and online blog Yum Dim Sum as evidence.

“We were not able to taste the product ourselves. However, the parties were agreed that it tasted of fruit which is scarcely surprising given that 99.8% of it consists of fruit,” continued Richards, who ruled that the product should have a standard VAT rating.

“We consider that a reasonable person, fully informed of the factors would consider that the product is, at very least, similar to a “water ice”.

“In fact, we consider that a reasonable person might conclude that the product is itself a “water ice” but, since HMRC did not argue the appeal on that basis, we will not make any determination to this effect,” concluded the judge.

This is not the first time that food manufacturers have appealed a HMRC VAT decision. In 1991, McVities successfully appealed a HMRC ruling that said Jaffa Cakes should be standard rated because of its resemblance to a biscuit. The makers argued that Jaffa Cakes were in fact small cakes. The tribunal agreed with McVities and to do this day Jaffa Cakes are still zero-rated.

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