In this case determined by the First-tier Tribunal (Thorncroft Ltd v HMRC – UTFTT/TC/2011/01536) the question was whether iced tea sold by Thorcroft was zero-rated or standard-rated.
The appellant, Thorncroft Ltd, is a manufacturer and supplier of a range of products which the company referred to as ice tea concentrate drinks. The production process was the same for all the drinks: a tea will be brewed in the normal way, but about fifteen times stronger than usual i.e. less amount of water. Sugar will be added to make a syrup at about 60 degrees Brix. The resultant syrup could be diluted with water, hot or cold to make a tea drink.
S30 of the Value Added Tax (VAT) Act 1994 provides for certain items to be zero rated as set out in Schedule 8. Item 4 listed in Group I of the schedule under “Items Overriding the Exceptions” is “tea, mate, herbal teas and similar preparations and extractions thereof”. Under the same Group I excepted items include “beverages and syrups’ which are standard rated.
So the question was whether the tea concentrate was a ‘soft drink’ attracting standard VAT of 20% or a tea drink, attracting zero rate of VAT. The Tribunal had to address the question of whether the concentrate crossed the line between a tea drink and a soft drink where tea can only be one of several ingredients. As for the process of manufacture was concerned it was simply done by the addition of hot, if not boiling, water, to dry leaves as done in a domestic scenario. Tribunal had the benefit of tasting a number of the teas in question, samples having been brought to the Tribunal hearing.
The tribunal concluded that, with regard to user the drinks will be will be described on the bottles as teas, purchased as teas, used by the consumer as teas and served at home as teas. They will be considered as teas in ordinary English usage and as considered by the ordinary, educated Englishman or a broad-minded VAT payer. Therefore, the tribunal allowed zero-rate treatment to the tea drink.
