In a recent First Tier Tribunal (FTT) case, Ferrero Ltd v HMRC, the FTT found that Nutella Biscuits are zero-rated for VAT.

VAT legislation provides that biscuits are zero-rated unless they are wholly or partly covered in chocolate or a substance that is similar to chocolate. HMRC argued that the Nutella Biscuits should be standard-rated on the basis that they were covered in a chocolatey substance.

Nutella Biscuits are constructed in layers, with Nutella filling and a ring made of a chocolate-like substance sitting within two baked biscuit elements that represent the outer surface of the product.

The FTT agreed that the chocolatey ring was visible between the two baked biscuit elements, but it did not form part of the outer surface of the biscuit so it could not be considered ‘covering’.

As such, the FTT found that the biscuits were not covered in anything and could therefore be zero-rated.

If you start selling a new food product, it’s important to consider its VAT rating, as mistakes can be costly. As demonstrated in the Nutella Biscuit case, the legislation is complex, so please get in touch with us if you need advice.