In a recent First Tier Tribunal (FTT) decision, Ferrero Ltd v HMRC, the FTT ruled that Nutella Biscuits are zero-rated for VAT purposes.

Under UK VAT legislation, biscuits are generally zero-rated unless they are wholly or partly covered in chocolate or a substance similar to chocolate. HMRC contended that Nutella Biscuits should be standard-rated on the basis that they were coated in a chocolate-like material.

Nutella Biscuits are made up of several layers, featuring a Nutella filling and a ring composed of a chocolate-style substance, enclosed within two baked biscuit layers that form the product’s exterior.

While the FTT accepted that the chocolatey ring was visible between the two baked layers, it concluded that it did not form part of the biscuit’s outer surface and therefore could not be classed as a ‘covering’.

Consequently, the FTT determined that the biscuits were not covered in any substance and could therefore be zero-rated for VAT.

When launching a new food product, it’s vital to assess its correct VAT classification, as errors can prove costly. The Nutella Biscuit case highlights the complexity of VAT legislation in this area—so please contact us if you require professional advice or clarification.