// Morrisons loses tax appeal after Nakd bars ruled confectionery and not cakes
// Morrisons says 18 types of the bars had been wrongly rated for tax between 2014 to 2018
// Morrisons appealed to a tax tribunal against HMRC’s decision to class Nakd bars as confectionery
Morrisons has lost a million-pound tax battle after a judge ruled a date-based snack bar is confectionery and not a cake.
The Big 4 grocer said it had overpaid £1 million in VAT to the HMRC over 18 types of the bars, which they said had been wrongly rated for tax, between 2014 to 2018.
In February, Morrisons appealed to a tax tribunal against HMRC’s decision to class Nakd bars as confectionery, as well as appealing against the tax body’s refusal to repay £1,000,163.39 in VAT paid on the bars.
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Morrisons argued that Nakd bars, which come in a number of fruit and nut mixes including lemon drizzle and banana bread, were not confectionery, or alternatively should be zero-rated as cakes.
After tasting a selection of the bars at a three-day hearing, Judge Anne Redston found they were confectionery and not cakes.
The tribunal heard the main ingredient in Nakd bars was dates, with sugar content by weight ranging from 33 per cent for their ginger bread flavour to 52 per cent for blueberry muffin, berry delight and rhubarb and custard.
“By way of comparison, KitKats are 51 per cent sugar; Maltesers are 51.7 per cent sugar and Mars bars are 59.9 per cent sugar, while Green & Black’s organic dark chocolate contains 28.5 per cent sugar,” Redston said.
Morrisons’ barrister argued that the bars are intrinsically sweet due to the ingredients, particularly the dates, and that the packaging focused on the health benefits of the snacks.
The tribunal was also told the bars are now located next to “healthy snacks” such as yoghurt bars, rather than being next to traditional chocolate biscuits.
After tasting some of the bars, Redston described them as having a “texture similar to fudge”.
“Cocoa orange tasted like the well-known product by another manufacturer known as a chocolate orange, and cocoa delight tasted like liquid chocolate,” she said.
“Although I could detect the ginger in Ginger Bread and the lemon in Lemon Drizzle, neither tasted like the related cakes.
“In contrast, bakewell tart did taste like its namesake, although its texture was entirely different, without the contrast between pastry and filling that is characteristic of the actual tarts.”
Judge Redston considered the sugar content, that the bars were sweet to taste, eaten with the fingers and that they were snacks when making her decision to dismiss the appeal.
“It is clear that all the Nakd Bars are confectionery,” she said.
Making her decision, the judge referenced a previous case about Pringles, where the judges said there was no need for “over-elaborate, almost mind-numbing, legal analysis” when deciding a food’s classification.
Redston, in a remote hearing of the first-tier tribunal, also dismissed the claim that Nakd bars were cakes.
“They do not look like typical cakes; their ingredients are not those of typical cakes; they would look out of place on a plate of cakes, and they are not held out for sale as cakes,” she said.
“Instead, they are held out for sale as cereal bars to be eaten as snacks.
“I was unable to taste the blueberries in the blueberry muffin, although that was unsurprising as they were only two per cent of total ingredients.
“The bar had no physical resemblance to its namesake: it did not taste or look like a blueberry muffin.”
She added that while “there was no evidence before the tribunal as to the recipe for muffins” she found there was no overlap between the ingredients of an actual blueberry muffin and the blueberry muffin flavoured Nakd bar, aside from a small quantity of blueberries.
Morrisons also brought the claim in relation to Organix bars, claiming they had overpaid £97,162.80 in VAT regarding the child-friendly snacks.
Redston also found they were confectionery and therefore not cakes.
An HMRC spokesperson said: “HMRC welcomes the decision which confirms that the products in dispute are standard rated confectionery for VAT purposes”.
A Morrisons spokesperson told the PA news agency the supermarket was considering whether to appeal.
with PA Wires
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