V@ update - June 2025

Welcome to the June 2025 edition of RPC's V@, our monthly update which provides news and insightful analysis from the VAT world.

News

• The Chancellor of the Exchequer has presented her Spending Review 2025 to Parliament. The Review set out details of departmental (including HMRC) budgets, for day-to-day spending until 2028-29, and capital investment until 2029-30.

The Spending Review 2025 can be viewed here.

• HMRC has published a policy paper entitled: Tax Policy Making Principles. This sets out the principles, such as, predictability and stability, underpinning the government's approach to delivering tax policy changes through the single major fiscal event cycle and how it will engage with stakeholders during tax policy development.

HMRC's policy paper can be viewed here.

• HMRC has published Brief 3, providing an update on the VAT treatment of income received from charity fundraising events, following the Upper Tribunal decision in Yorkshire Agricultural Society v HMRC [2025] UKUT 00004.

HMRC's Brief can be viewed here.

Case reports

Get a Drip Ltd v HMRC [2025] UKFTT 00500 (TC)

Get a Drip Ltd (GAD) is a company that supplies intravenous vitamin drips and injectable booster shots to customers. The services are provided by registered medical practitioners.

GAD registered for VAT and submitted a repayment return on the basis that its supplies were zero rated because they fell within Item 1, Group 12, Schedule 8, Value Added Tax Act 1994 (VATA) – which zero rates supplies of goods designed for use in connection with medical treatment, if the goods are dispensed to an individual for that individual's personal use.

HMRC challenged GAD's VAT return and, although they adopted varying positions throughout the enquiry, ultimately decided that the supplies were standard rated.

GAD appealed to the First-tier Tribunal (FTT) but no longer sought to argue that its supplies were zero-rated. Instead, GAD considered that its supplies were exempt from VAT because they were supplies "consisting in the provision of medical care by a registered medical practitioner" and so fell within Item 1, Group 7, Schedule 9, VATA.

The only issue for the FTT to determine was whether the supplies fell within the 'medical care' exemption. The parties agreed that the legal test to apply is whether the supplies were "medical interventions, the principal purpose of which is diagnosing, treating or, in so far as possible, curing diseases or health disorders, or to protect, maintain or restore human health".

HMRC argued that GAD's supplies promoted general wellness and wellbeing but did not aim to diagnose, treat, or cure diseases.

GAD provided evidence of 11 customer cases in which a health disorder had been diagnosed and treatments (intravenous vitamin drips) were prescribed. An expert medical witness confirmed that the treatments in each case were reasonable to treat the diagnosed health disorders.

The FTT accepted the expert evidence and held that the supplies fell within the 'medical care' exemption because their principal purpose was to treat disorders or protect/maintain human health.

Why it matters

HMRC often challenge a taxpayer's reliance on the medical care exemption, particularly in relation to services they consider to be cosmetic, or relating only to wellbeing.

GAD's success can be attributed, in part at least, to it being able to provide well-documented files to support its position, which may not always be possible for medical service providers due to patient confidentiality issues, and to the expert evidence it relied on in support of its case. Notably, HMRC did not adduce its own expert evidence.

The decision can be viewed here.

Walkers Snack Foods Ltd v HMRC [2025] UKUT 155 (TCC)

Walkers Snack Foods Ltd (Walkers) initially appealed to the FTT against HMRC's decision that its product, Sensations Poppadoms, should be treated as standard-rated for VAT purposes. The FTT found that, because this product is similar to potato crisps and contains potato granules (i.e. is made from potato), it should be standard-rated for VAT purposes. Walkers appealed to the Upper Tribunal (UT).

Group 1, Schedule 8, VATA, sets out which foods are zero rated for VAT. There are also excepted items within this Group, including "potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch …" when packaged for human consumption without further preparation (Excepted Item 5).

The UT identified Proctor & Gamble UK v HMRC [2009] EWCA Civ 407,  as the key authority on the application of Excepted Item 5. In Proctor & Gamble, the Court of Appeal (CoA) found that a product made using at least 40% potato content, and similar to potato crisps, did fall within Excepted Item 5. In line with this case, the UT considered:

1. whether Sensations Poppadoms were made from potato or a derivative of potato; and
2. whether Sensations Poppadoms are "similar" to potato crisps.

Sensations Poppadoms' ingredients include approximately 18% potato granules, 18% potato starch and 4% modified potato starch. They also contain gram flour and rice flour. Walkers argued that potato granules are not potato content and so the product did not fall within Excepted Item 5. It also argued that the FTT had failed to give sufficient weight to elements such as the product’s name, the gram flour content, distinct flavours, and the manufacturing process in its multifactorial assessment on similarity.

The UT dismissed Walkers' appeal, confirming that Sensations Poppadoms should be standard-rated. The UT's basis for this was that "potato" includes potato granules, and therefore the product's potato content was significant at 39-40%. The UT rejected Walkers' argument that sliced potato can be considered as potato, but potato granules cannot, as the granules ceased to be potato at a certain point in the manufacturing process.

Moreover, the UT concluded that the FTT's multifactorial assessment and conclusions, as to whether the product is similar to potato crisps, to have been reasonable. The UT noted that it was possible to disagree with the weight given by the FTT to individual elements in its multifactorial assessment, but the impact of this would not have materially affected the overall assessment and decision, which was reasonable on the basis of the evidence before it. 

Why it matters

This decision reinforces the guidance provided by the CoA in Proctor & Gamble and is important for those who manufacture similar products. Products with approximately 40% potato or potato derived ingredients, and crisp like features, are likely to continue to fall within Excepted Item 5, regardless of any marketing or manufacturing variances.

The decision can be viewed here.

Rushby Dance and Fitness Centre and others v HMRC [2025] UKFTT 594 (TC)

This case involved appeals from four separate dance tutors. The FTT considered whether private dance tuition provided by the dance tutors qualified for VAT exemption under Group 6, Item 2, Schedule 9, VATA.

The dance tutors argued that their respective dance classes fell within the exemption as they provided private tuition as individuals, rather than in their capacity as an employee of a company. They argued that the subject of dance generally was something "ordinarily taught in school or university". HMRC argued that the specific classes being taught, such as ballroom, yoga and exercise, were not ordinarily taught in school or university and so did not meet the requirements to benefit from the VAT exemption.

The FTT followed HMRC v Cook [2021] UKUT 15 (TCC), in which the UT held that a subject is “ordinarily taught in a school or university" if it is commonly taught in a school or university. In Cook, the UT found that private Ceroc dance lessons were not commonly taught in schools, leading to the conclusion that the supplies in that case were not exempt.

Although dance may be commonly taught in schools and universities, the FTT required evidence that the specific classes being provided by the dance tutors in this case were also commonly being taught in schools and universities. The dance tutors presented evidence of the educational aspects of the classes, including structured lesson plans and progression pathways, no evidence as to the specific types of dance classes being commonly taught was provided. Consequently, the FTT found that the dance tutors' supplies did not fall within the exemption.

Why it matters

This decision illustrates the high evidential threshold that needs to be met in cases of this nature. The dance tutors needed to provide appropriate evidence that the specific lessons in question are commonly taught in schools and universities, in order for the FTT to be in a position to evaluate whether the exemption applied or not.

The decision can be viewed here.