HMRC change of policy regarding VAT treatment of bicarbonate of soda

On 13 July 2018 HM Revenue & Customs (HMRC) published information about its change of policy regarding the VAT treatment of bicarbonate of soda.

Previous HMRC policy was that bicarbonate of soda was subject to the standard rate of VAT, regardless of how it was held out for sale. HMRC now accept that bicarbonate of soda qualifies for the zero rate of VAT as a food product if it is packaged and sold as a baking product. Supplies of bicarbonate of soda that are sold in larger, industrial-sized quantities, or which are held out for non-culinary purposes, remain standard-rated.

Claims for VAT refunds for a four year period can be submitted to HMRC. The businesses most likely to benefit from VAT refunds are retailers. Wholesalers may find it more difficult to satisfy HMRC, that they were unable to pass the VAT cost on to their customers.

The change of HMRC policy follows the First Tier Tribunal decision in Phoenix Foods Limited [2018] UKFTT 018 (TC).

For more information please contact the Garbutt + Elliott VAT Team.