Unilever has joined smoothie-maker Innocent Drinks in calling for a rethink of the VAT regime on soft drinks.
The move follows a series of high profile cases highlighting anomalies in the VAT classification system, which manufacturers and trade associations alike have branded as “archaic”
Unilever UK sales director Tony Smith said: “It’s crazy. With Vie Shots, we’ve launched a product that is absolutely bang on the money when it comes to health and convenience. Vie Shots are the perfect way to help consumers get their five-a-day for fruit and veg, and yet it’s subject to VAT.
“Any product that helps consumers pursue a healthier lifestyle like this shouldn’t be hampered. We need to look again at the classification of soft drinks and we’re lobbying the relevant government departments to this end.”
Innocent Drinks marketing director Jamie Mitchell said it was a “nonsense” that products like Vie Shots and Innocent smoothies were subject to VAT when their raw ingredients were zero-rated for VAT purposes and the government was actively trying to boost fruit and vegetable consumption.
He added: “Smoothies are not consumed primarily to ‘quench thirst’, which seems to be how they define beverages [which are charged at 17.5% VAT], so we want them to be reclassified as a food.
“We are considering taking this to HM Revenue & Customs. I’m aware that [fresh juices producer] Grove Fresh went to tribunal over this issue last year and lost, but we would be making a slightly different argument.”
One VAT expert said: “The current system is a complete mess with VAT on cakes but not biscuits, on compressed fruit bars, but not on chocolate éclairs and so on. The UK government could reduce the rate to 5% for some healthy products like Vie Shots without having to amend the European VAT directive, but to be honest, tinkering around the edges like this would open up a whole can of worms.”
While the VAT classification system was “full of anomalies”, reforming it was not the answer to tackling the nation’s obesity problem, claimed Steve Shaffelburg, policy manager at the British Heart Foundation. “You end up going down the road of a fat tax and we feel this would be a regressive step that would disproportionately impact people on low incomes.”