In 2024, we saw numerous legal cases scrutinising the VAT rating of food and drink, and it looks like this trend is set to continue into 2025! The VAT treatment of food and drink has long been a contentious issue, but in the case of Global By Nature Ltd v HMRC (TC09396), we see the first instance of a tribunal or court examining VAT law specifically in relation to ‘sports drinks’.

Under VAT legislation, food and drink (excluding catering) can generally be zero-rated, but there is an extensive list of exceptions that are subject to VAT at 20%. One such exception is “sports drinks that are advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk.” This also includes powders or syrups used to make such drinks.

During the Tribunal, HMRC argued that the wording of the legislation effectively defines ‘sports drinks’ as those “advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk.” They claimed that Global By Nature Ltd’s drink powders met this definition, were marketed accordingly, and should therefore be standard-rated.

However, Global By Nature Ltd (GBN) contended that, while their powders were intended for consumption as drinks, they did not fall under the category of ‘sports drinks’—and even if they did, they were not marketed as such.

The Tribunal ultimately sided with GBN, determining that two key tests must be applied when assessing whether a product meets the legislative criteria:

  • Is the product a sports drink?
  • If so, is it advertised or marketed as enhancing physical performance, accelerating recovery after exercise, or building bulk?

As ‘sports drink’ is not defined in VAT law, the Tribunal examined various dictionary definitions and common uses of the term. It concluded that GBN’s powders did not contain sufficient carbohydrates to be classified as sports drinks. Since they did not meet this definition, their advertising and marketing were irrelevant—meaning they did not fall under the exception and could therefore be zero-rated.