Ferrero UK Limited v The Commissioners for HMRC [2025] UKFTT 1202 (TC)

[2025] UKFTT 01202 (TC)Case No TC09654
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 1 and 2 July 2025Date Judgment date: 18 August 2025
London- Taylor House
Appeal reference: TC/2023/07689
TC/2024/00370
VAT – zero rating of food – whether nutella Biscuit “partly covered with … some product similar in taste and appearance” [to chocolate] – no – appeal allowed
Before
TRIBUNAL JUDGE AMANDA BROWNMICHAEL BELL
Between
FERRERO UK LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMs Valentina Sloane KC, of Counsel, instructed by EY LLP for AppellantMr Edward Hellier, of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs. for RespondentsDECISION

Introduction

[1]This appeal concerns whether “nutella biscuits” (Biscuits) manufactured by Ferrero UK Limited (Appellant)are “biscuits… partly covered with chocolate or some product similar in taste and appearance” for the purposes of the Value Added Tax Act 1994 (VATA) Schedule 8 Group 1 Excepted Item 2 (Excepted Item). It arises in connection with the following decisions (Decisions) issued by HM Revenue & Customs (HMRC):(1) a liability ruling contained in a letter dated 26 August 2022 from HMRC that the Biscuits were properly taxed for VAT purposes at the standard rate of 20% as they meet the description within the Excepted Item; and(2) assessments to VAT for prescribed accounting periods 04/22 to 04/23 issued by HMRC on 6 July 2023 and amended on 23 August 2023 charging output tax previously undeclared in respect of sales made of the Biscuits.[2]The Decisions were both upheld on review by HMRC.

The biscuits

[3]The evidence available to us consisted of a bundle of documents of 441 pages. We were not referred to the majority of the bundle but notably it included confidential details of the production process and survey data to which we were referred, at least in part. We had three witness statements. Giovanni Aragone’s evidence concerned the nature of the Biscuits, their manufacture and the patent associated with them. Rosario Scarfati’s evidence addressed and introduced the correspondence with HMRC. Jennifer Culby was responsible for the procurement of a customer survey concerning the Biscuits, her evidence explained the process of the design of the survey and its results. Each of the witnesses gave sworn oral evidence and was cross examined. We found them all to be truthful and we accept their evidence.[4]We were also provided with the various component elements of the Biscuits.[5]From that evidence we make the findings of fact set out in paragraphs 6 to 12 below.[6]The Biscuits comprise four component parts:(1) A circular biscuit cup measuring 45 mm in diameter at the base and 43 mm at outer edges of the top; the thickness of biscuit from the visible top edge is 2 mm such that the inner edge of the cup cavity is 39 mm We were however told, and accept, that there may be up to 1 mm variation in the biscuit elements. From the 10 empty cups with which we were provided there seemed to be very little variation in diameter, the internal depth of the cup is approximately 6 mm.(2) A filling of “nutella” approximately 5mm deep.(3) A ring (Ring) made from a substance which the Appellant accepts has the appearance and taste of a product similar to chocolate which is approximately 39 mm in diameter to its outer edge, the hole in the middle is approximately 19 mm in diameter. The Ring is less than 1mm deep We were provided with 30 such Rings, whilst the outer dimension was reasonably uniform the inner edge dimension varied and the hole in the middle was not uniformly round. . It represents approximately [REDACTED] of the overall composition of the Biscuits.(4) A biscuit disc 35mm in circumference and 2 mm in depth. On the upper surface is an embossed heart 23 mm at its widest point and 22 mm from the top of the loop of the heart to its point. The heart is relieved from the surface by approximately 1 mm and an “n” is impressed into the centre of the heart. Around the circumference edge are a series of small indentations not dissimilar to the marking on an analogue clock but without numbers.[7]The Biscuits are manufactured such that the biscuit elements (the circular biscuit cup and the biscuit disc) are baked and the final Biscuits are assembled from the component parts by reference to a patented process. We were provided with confidential evidence as to the product design, development, and manufacture. It is not necessary for us to set that evidence out in full as ultimately that evidence, whilst useful context, is not material for the purposes of our decision.[8]We summarise the production process as follows: the biscuit cup is filled with “nutella”. The Ring is then inserted to abut and adhere to the inner edge of the biscuit cup. The biscuit disc is then placed centrally over the “nutella” filling and the Ring which adheres to the bottom of the biscuit disc.[9]Visually the finished Biscuits are predominantly the baked biscuit elements; there is a 1 mm gap between the biscuit disc and the top edge of the biscuit cup through which the Ring can be seen. This represents approximately [REDACTED] of the Ring (i.e. 1mm of the outer circumference of the Ring). By design the Ring is beneath the biscuit disc and not at the same level as the upper surface of the disc. We were provided with samples of the biscuits on the hottest day in 2025 (to the date of the hearing). The packaging advises that the product should be stored at a temperature below 24° C; however, in transportation of the product to the tribunal centre conditions had greatly exceeded 24° C. Examination of all of the product available to us in the two forms of packaging in which the Biscuits are sold (see paragraph 10 below) revealed that where the Biscuits had not been stored horizontally, for a significant proportion of the individual Biscuits the “nutella” and the Ring had melted, pushing up through the gap. Counterposing the lifted area, the Ring and nutella were lower than the bottom surface of the biscuit disc. We find this movement in the filling was a consequence of the temperatures and not an intended feature of the Biscuits.[10]The Biscuits are marketed and sold in two styles of packaging:(1) a metallic lined cardboard tube sealed with a foil lid and capped with a red plastic cap containing 12 Biscuits; and(2) a resealable pouch containing 20 Biscuits.[11]The branding on the packaging is substantially similar. Predominantly white bearing the “nutella biscuits” logo and a picture in which there is a stack of Biscuits and a broken biscuit from which it can be discerned that the Biscuits have “nutella” inside them.[12]Included within the bundle was a copy of the patent. On the basis that both parties relied on the language used in the patent documentation and the European patents specification is publicly available information we set out below the relevant and pertinent parts of the patent. The patent reference is EP 3 369 321 B1. It was prepared by employees of the Appellant and was filed on 6 February 2018 and published on 8 July 2020:
“[0001] The present invention in general relates to the field of filled biscuits … [0002] … A known solution of filled biscuit, which is constituted by two disc -shaped bodies made of biscuit set between which is a layer of filling, according to an overall sandwich for configuration. [0003] This type of solution can use as filling only creams that are particularly viscous and firm, the aim being to prevent the filling from leaking out of the biscuit. [0004] The possibility of using, instead, softer and more creamy fillings still represents a technical problem that is markedly felt. … [0012] In general, the filled biscuit described herein comprises container body, which defines a cavity contained in which is a filling and a cover, which closes at least partially the cavity … with the filling … inside it. The body … and the cover are both made a biscuit. [0013] The biscuit described herein further comprises a second filling material, which is set in contact and simultaneously with the body, the cover, and the layer of filling so as to seal the cover to the body, and at the same time withhold the filling inside the cavity of the body. [0014] The material [that referred to in 0013]] hence performs the dual function of barrier against exit of the filling, on the one hand, and, on the other, of adhesive between the body and the cover, thus ensuring a firm connection therefore. … [0026] The body has a mouth edge that defines a top opening larger than the overall dimension in plan view of the cover, so that the latter will rest completely on the layer of filling and between the latter and the edge a gap is created of substantially annular shape. In this case the material [referred to in [0013]] is applied along the gap around the cover. [0027] … the material [referred to in [0013]] is in contact, laterally, with the cover and the edge of the body, and, at the bottom, with the layer of filling. It acts, on the one hand, as adhesive that holds together the cover and the body and, on the other, constitutes a barrier designed to prevent exit of the layer of filling from the cavity.”
[13]On the basis of the patent, we find the nature of the nutella filling drove the design and manufacturing process for the Biscuits which are designed such that the biscuit elements contain both elements of the filling.[14]As indicated above, Ms Culby’s evidence concerned a consumer survey commissioned by the Appellant. Ms Culby was subject to extensive cross examination from which HMRC contended that the survey was incapable of presenting a statistically relevant view of the “ordinary reasonably informed person”.[15]We find, on the evidence provided, that the Appellant applied recognised criteria for the selection of participants in a way intended to obtain a fair outcome. As far as relevant to the issue we have to determine we note that the survey involved 201 participants who were asked to sort 10 biscuit products (one of which was the Biscuit) into two groups: those the participants considered were wholly or partly covered in chocolate or a similar substance and those that were not. The participants were provided with HMRC’s guidance on what they consider to be biscuits which were wholly or partly covered in chocolate or a similar substance, but the participants were not told that they must read it, that was a decision for them. The participants did not know the purpose of the survey or that it was the Appellant who had commissioned it.[16]During the hearing we expressed the view that we did not intend to place any significant weight on the results of the survey. However, in the end we have decided that we do not need to take any account of the views of the survey participants. In this regard we have gone slightly further than the Tribunal in Innocent Ltd v HMRC [2010] UKFTT 516 (TC) (Innocent) did and adopt a similar view to that taken more recently by the First-tier Tribunal in Walkers Snack Foods Limited v HMRC [2024] UKFTT 00031 (TC). We consider that the survey presents a view of how the general public sorted a range of biscuits into groups of those wholly or partly covered in chocolate and those not wholly or partly covered and no more; it is for us to apply the statutory test and we should not do so by reference to the views of 201 (or more or fewer) people. As was apparent from the survey results 5% of participants considered that a conventional digestive biscuit was wholly or partly chocolate covered and that the chocolate digestive was not. Those participants plainly sorted the biscuits incorrectly applying the statutory test.

The legislation

[17]Section 30 VATA provides that supplies of goods or services of a description specified in Schedule 8 VATA shall be subject to VAT at zero rate such that no VAT shall be charged on the supply but in all other respects the supply shall be treated as a taxable supply.[18]Group 1 to Schedule 8 VATA is complicated with general provisions, exceptions to those provisions, overrides to the exceptions and a series of notes. General item 1 provides for the zero rating of “food of a kind used for human consumption” but that does not include confectionery which, by the terms of item 2 of the excepted items includes the Excepted Item. None of the overriding items are relevant in this appeal. Note 5 provides “… for the purposes of item 2 of the excepted items ‘confectionery’ includes chocolates, sweets, and biscuits; drained, glace, or crystallised fruit; any item of sweet and prepared food which is normally eaten with the fingers.”

The issue

[19]We are called to interpret the meaning of the phrase “partly covered” in the context of the Biscuits.[20]In so doing, and in the context of the dispute between the parties, we must first determine the approach to be adopted to interpretation, identify the meaning of the relevant phrase, and then apply the statutory test, correctly interpreted, to the Biscuits.[21]We are grateful to both Counsel for their carefully prepared skeleton arguments and comprehensive oral submissions including their willingness to engage with the Tribunal’s detailed questions intended to ensure a thorough understanding of their respective positions. We set out below a summary of their respective positions with an aim to do justice to them but without unnecessarily lengthening the judgment. We assure the parties to the extent that an argument has not been fully set out it was nevertheless considered when reaching our conclusion.

Approach to statutory construction

[22]The Appellant contends, by reference to the Court of Appeal judgment in LIFE Services Ltd v HMRC [2020] EWCA Civ 452 paragraph 99, that where a term is undefined in VAT legislation the meaning of the term is to be determined by considering its usual meaning in everyday language while also taking account of the context in which it occurs and the purposes of the rules of which it forms part.[23]It was noted that no previous Tribunal or Court has identified a discernible statutory purpose for the Excepted Item (see consideration in the Innocent judgment regarding accepted social policy underpinning Item 1 but the absence of a policy for the exceptions generally, paragraphs 20 – 21 and 23). As a consequence we are required to interpret the everyday language in context.[24]By reference to the Supreme Court judgement in HMRC v SSE Generation Ltd [2023] UKSC 17, the Appellant submits that the Tribunal may consider dictionary definitions when ascertaining the usual meaning of the term. Further, referencing the judgment of Nugee LJ in HMRC v Dolphin Drilling Ltd [2024] EWCA Civ 1 (paragraph 41) and the Court of Appeal in Urenco Chemplants Ltd b HMRC [2022] EWCA Civ 1587 (at paragraphs 106 – 108, adopting the reasoning of Lord Neuberger in R (oao Ghai) v Newcastle City Council [2010] EWCA Civ 59 at paragraphs 21 – 26 and 33)the approach may be an iterative one driven by context. That is particularly so in a situation in which the statutory language adopted by Parliament has no statutory definition and no established special legal or technical meaning.[25]HMRC appeared to broadly accept the Appellant’s suggested approach to the interpretation of the legislation though differed on the outcome of such an approach. We therefore adopt that approach. Meaning of “partly covered” Appellant’s submissions

Meaning of “partly covered”

[26]Ms Sloane referred us to google, the Oxford English Dictionary, Oxford Dictionary of English, and the Cambridge Dictionary with a particular focus on the illustrative examples of use provided by those dictionaries. From these sources it was contended that in order to be covered (even partly) the asserted cover must be over the thing being covered, usually for the purpose of protecting or concealing that which is covered.[27]It was contended that each of the dictionaries connoted a purpose for the cover such that we are entitled to take account of the function performed by that which is said to be the cover.[28]As to “partly” the Appellant contended that to be partly covered the extent of the cover must be “non-trivial”.[29]The Appellant challenged the basis on which the Decisions were taken as applying the wrong test. We were referred to the Decisions and the review of those Decisions in which the basis of the decision that the Biscuits are determined as standard rated was explained as follows: (1) The liability ruling:
“the bottom biscuit base upon which the Nutella is dosed and the ‘sealant substance’ is placed is not wholly covered by the top biscuit therefore the ‘sealant substance’ is visible on the surface of the biscuit. As demonstrated by the tribunal case of BN Tartelettes (MAN/02/563) substances that are visible from the external surface of the biscuit effectively become part of the surface of that biscuit. … Bourbon biscuits do not have any amount of chocolate or any similar substance visible on or covering the surface of the biscuit. … as the North Cheshire Foods Ltd tribunal confirmed, the specific size of the chocolate covered area is irrelevant as even a small amount of chocolate on the surface will be considered as partially covering the biscuit.” (2) The review conclusion letter for the liability ruling: “… it was noted that the top biscuit is smaller than the base biscuit and so causes the sealant substance to be seen and become part of the top layer of the biscuit. … the bottom biscuit base is not wholly covered by the top biscuit, and therefore the sealant substance is visible on the surface of the biscuit effectively becoming part of the top layer. … The product as marketed shows the top biscuit sits inside of the base. The filling/sealant covers the part of the larger bottom biscuits (base) and is also visible in the gap between the small top biscuit and the larger base. … The sealant substance makes up at least [REDACTED] of the product and thus amounts to more than the 1% of the content confirmed in the case of North Cheshire Foods Ltd … The guidance from the North Cheshire Foods Ltd tribunal indicates that the specific size of the chocolate covered area is irrelevant as even the smallest amount of chocolate on the surface can be classed as covering the biscuit. In the case Adams Foods, it was held that the extent to which a biscuit is chocolate covered is immaterial to determine its liability. Notable exceptions to this rule are gingerbread men and like products where the chocolate is insignificant, or the chocolate is embedded in the surface or included in the dough mixture before cooking, or as in a bourbon biscuit where the chocolate or similar product forms a sandwich layer.”
[30]The Appellant contends that the asserted basis for the Decisions cannot be derived from the case law referenced by HMRC and that the issue of visibility of the chocolate or chocolate -like substance is irrelevant when applying the statutory test. The Appellant notes that the chocolate substance is visible in all of the examples in which HMRC accept that the product is not partially covered and thereby zero rated (i.e. gingerbread men with chocolate eyes, bourbon biscuits and chocolate chip cookies).[31]Concerning the Tribunal’s decision in United Biscuits (UK) Ltd v HMRC [2023] UKFTT 864 (TC) (Blissfuls)which considered “Blissfuls”, the Appellant invited us to conclude that the Tribunal had erred in its application of the statutory test and that we were entitled not to follow the decision on the grounds that it was wrong and/or distinguishable on the facts.

HMRC’s submissions

[32]Mr Hellier urged us to follow the direction given by the Court of Appeal in Ferrero UK Ltd v HMRC [1997] STC 881 both in the context of previous cases and even more so, HMRC guidance, such that we should not “elevate issues of fact into questions of principle”. He contended that our task was a simple one: we needed to determine from the perspective of the ordinary and informed person in the street, or put another way taking a reasonable view of all the facts (see HMRC v Proctor & Gamble UK [2009] EWCA Civ 407 (P&G) paragraph 20 and 21), whether the Biscuits are “partly covered” by the Ring. We were encouraged not to be concerned as to where the line between a zero-rated biscuit and a standard rated biscuit lay, we simply needed to decide whether the Biscuits were standard rated by reference to the statutory test (paragraph 32 P&G).[33]HMRC submitted that, in this sense, whether a biscuit is “partly covered” is uncomplicated to discern and can clearly be seen by the approach adopted in Blissfuls:
“19. Both parties agree that the Product is a biscuit. Both parties also agree that there is a biscuit cup base and, despite differences over calculations which neither party took any real issue over, there is a biscuit logo which does not wholly cover the chocolate layer. 20. The question therefore, it seems to us, is what, if anything, covers the remaining areas which is not covered by the biscuit logo. 21. The Oxford English Dictionary defines “partly” as “to some extent” or “not completely”. “Covered” is defined as “having a layer or amount of something on it.”
We found this useful as a starting point which appears consistent with the approach of the Tribunal in North Cheshire Foods Ltd (1988 Decision 2709) who considered whether thin lines of chocolate on top of a biscuit “partly covered” the biscuit. The Tribunal in that case held that:
“the piping of even a small quantity of chocolate over a biscuit must have the result as a simple practical matter, that it becomes partly covered.” … 24. Turning to whether the chocolate covers the biscuit, we were not persuaded by the Appellant’s submission that the covering must be first constituent part of a biscuit to be bitten into, otherwise it is a filling not a covering. In our view, this is not the correct test to apply. We consider that this writes additional words into the legislation. Similarly, we did not find that the “sandwich biscuit” comparison assisted. In our view, it would be a mistake to try to put a gloss on the words of the statute, in what is an acutely fact sensitive exercise, by imposing additional categories of “filling” and “layers” as distinct from “covering”
. In our view, while a layer can be contained within the biscuit cup base as it is in this case, this does not prevent it being part of the covering; all will depend on the facts of a particular case. The legislation does not require one layer to be higher than another to be classed as covered and we consider that this would be inconsistent with applying the ordinary meaning of the words of the statute and amounts to writing in additional words. … 26. Returning to the test and applying a practical answer to a practical question, namely is the biscuit partly covered by chocolate, we consider that the area which is not covered by the biscuit logo has a layer of chocolate on its surface. We accept that the biscuit logo covers most of the biscuit, but the requirements of the legislation are satisfied even if the covering is only “to some extent”. We asked ourselves, if the biscuit logo does not cover the whole, what covers the remaining area? We consider that the view of the ordinary man in the street informed as we are, would conclude that the biscuit is partly covered by a layer of chocolate.” “the piping of even a small quantity of chocolate over a biscuit must have the result as a simple practical matter, that it becomes partly covered.”[34]Thus, HMRC’s position was that wherever a chocolate substance forms part of the outer layer of the biscuit it must, within the context of a statutory provision intended to tax biscuits partly covered in chocolate, represent a partial covering of the biscuit. In the context of the statutory language “covered” requiring the application of the definition of a “cover” as a noun rather than a verb, “covered” meaning “having a cover, covering or lid.” In this context, Mr Hellier contended that there was no purpose required for the cover; it merely needed to form part of the outer surface of the biscuit.[35]Relying on the V&DT decision in United Biscuits (UK) Limited v HM Customs & Excise [2003] VDT decision number 18090 (BN Tartelettes), HMRC contended that a filling and a cover were not mutually exclusive, a filling could partly cover a biscuit.[36]Relying on paragraphs 36, 39 and 46 of the Court of Appeal judgment in Greenspace (UK) Ltd v HMRC [2023] EWCA Civ 106 (Greenspace)we were warned that we must apply the statutory language which, in this case may draw fine distinctions, and it was not for the Tribunal to ameliorate what might be argued to be anomalous outcomes.[37]After some debate, HMRC accepted that despite the V&DT decision in North Cheshire Foods Ltd v HMCE [1988] VDT decision number 2709 (NCF), a biscuit where a cover of chocolate or similar substance is de minimis, the biscuit will remain eligible to be zero rated (as with the gingerbread man with chocolate eyes).

Discussion

[38]None of the cases concerning the VAT liability of biscuits nor HMRC’s guidance evaluates the statutory test in exactly the way the Appellant invited us to approach it i.e. to reflect on the common usage of the words “partly covered”.[39]As confirmed by Jacobs LJ in P&G it is not our role to put a gloss on or otherwise define what “partly covered” means simply to determine whether in the sense of the view that would be taken by an informed consumer (see P&G paragraphs 20 and 23) the Biscuit is partly covered. However, the Tribunal has the benefit of three very recent Court of Appeal and Supreme Court cases which help direct the approach when ordinary terms without statutory definition are used in taxing statutes.[40]We agree with the Appellant that the test cannot be one which is determined by whether the chocolate like substance is visible. However, having considered the detail of HMRC’s case we do not interpret HMRC’s case as one founded only or materially on the visibility of the Ring despite the language used in the Decisions and the review of them.[41]We have carefully considered the arguments put to us and consider that the statutory test requires us to examine the outer surface of the finished product as a whole (see in particular the approach adopted in BN Tartelettes) to determine whether chocolate or a similar substance has been laid over the surface of the finished product so as to thereby form the outer surface of that finished product. In so concluding we do not strictly impute a purpose test for the cover, rather it is a test which can be objectively discerned by the informed consumer by asking: is the chocolate like substance laid over the other elements so as to form, in whole or in part, the outer surface of that finished product viewed sensibly?[42]We consider that to represent a partial covering the chocolate must be more than de minimis. Semantically de minimis and non-trivial may be considered to connote the same approach but on balance we consider that de minimis implies a degree which is largely irrelevant whereas non-trivial may be larger.[43]We consider that this interpretation of “partly covered” is supported by HMRC’s acceptance, both in guidance and for the purposes of the present hearing, that any chocolate or similar substance embedded into the biscuit dough or forming the filling of a sandwich biscuit does not partially cover the biscuit. Gingerbread men’s eyes, whilst representing a cover (within our interpretation) meet the de minimis criteria. Applying the statutory test Appellant’s submissions

Applying the statutory test

[44]The Appellant contends that the Biscuits are not partly covered in chocolate because:(1) The structure of the Biscuits is such that the visible Ring does not, even partly, cover the finished Biscuits. Whilst filling and cover are not binary concepts (as demonstrated in BN Tartelettes where the chocolate might realistically be said to be both filling/cover) there would be occasions where a filling might be visible but would not represent a cover. In this regard Ms Sloane referred to a latticed topped pie through which the filling underneath would be visible but could not be said to be the top or cover of the pie. The Biscuit in this case shows a small part of the Ring but it does not form part of the outer surface of the finished Biscuit; it is more appropriately compared to the filling in the pie or a bourbon biscuit.(2) The extent of the chocolate like substance was simply too small to amount to a partial covering of the Biscuits.[45]A conclusion that the Biscuits are not partly covered by chocolate was consistent with: the marketing which describes them as filled; the terms of the patent; the function of the ‘chocolate’ Ring to cap the outer edge of the nutella and to adhere to both the cup and lid; and the consumer study.

HMRC’s submissions

[46]HMRC contends that the Biscuits are partly covered in a chocolate like substance. They submit that the Ring covers the nutella which itself sits on top of and within the biscuit cup. The biscuit disc then partially sits on the Ring, the Ring thereby forms part of the outer surface of the finished product. As in Blissfuls we should conclude that as the biscuit disc only partially covers the top surface of the finished Biscuit and ask what covers the rest, with the only possible answer being that it is the Ring and the Ring has been accepted to be made from a substance similar to chocolate.[47]They further contend that as the Ring represents at least [REDACTED] of the overall product it cannot be considered to be de minimis.

Discussion

[48]Having carefully considered the facts as we have found them, we have concluded that the Biscuits are not partly covered in a substance similar in taste and appearance to chocolate.[49]The construction of the final Biscuit viewed as a whole is that all its outer surface is not covered by the Ring even to a de minimis extent. The Biscuit is constructed so that the nutella filling and the Ring sit within and between the two baked biscuit elements of the finished product which represent the outer surface of that finished product. We accept that the Ring is visible between the two baked (and manifestly not chocolate) elements of the Biscuit. However, the manufacturing process, in accordance with the patent, assembles the final Biscuit such that the nutella and the Ring is lower than the outer surface and, in our view, it does not form part of the outer surface. The outer surface of the Biscuit consists entirely of the biscuit cup and disc lid.[50]Our decision may appear to be contrary to that reached by the Tribunal in the Blissfuls appeal and such a conflict may be right. However, on the facts, we have decided that the biscuit disc and cup do not together, only partially cover the finished Biscuit whereas the Tribunal in Blissfuls concluded that the biscuit logo on the Blissful was a partial covering. In our view the two baked biscuit elements of the Biscuit are not dissimilar to a traditional sandwich biscuit where the two baked biscuit elements contain (but not fully) the filling element which is plainly visible when the finished product is examined.[51]Were we to have concluded that the Ring represented a cover applied to the outer surface of the finished Biscuit, we would not have concluded that it was a de minimis covering. The V&DT accepted in NCF that a 1% covering was sufficient to constitute a partial covering. Although only a rough estimate on the basis the parties were agreed that the Ring constituted [REDACTED] of the finished Biscuit and circa [REDACTED] of the upper surface of the ring was visible more than 1% of the product represented visible chocolate like substance.

Fiscal neutrality

[52]We note that both skeleton arguments address the question of fiscal neutrality. The Appellant contended only that the principle was relevant (referring to the FTT’s judgment in W M Morrison Supermarkets Plc v HMRC [2024] UKFTT 000181 (TC). In response HMRC submitted that the principle of fiscal neutrality did not apply due to the interpretive requirement to construe the zero-rating provisions strictly as exemptions with refunds. Further, HMRC observed that the closest parallel product to the Biscuits were Blissfuls which, following the Tribunal’s decision in Blissfuls subject to VAT at the standard rate.[53]Arguments on fiscal neutrality were not elucidated in the hearing.[54]We have reached our decision in this case without considering the question of fiscal neutrality. That principle requires that goods or services which are relevantly the same should be taxed in the same way. We have determined the relevant characteristics of the Biscuits and applied the statutory language to determine that they are not partially covered in a chocolate like substance. Whilst we accept that the Biscuits are similar to Blissfuls they are not the same product. We do not consider, to the extent that the concept is relevant in this appeal (noting that HMRC contend that it is not) that our decision breaches it.

Right to apply for permission to appeal

[55]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 18th AUGUST 2025