Innate-Essence Limited, which sells the shots under The Turmeric Co brand, appealed to the tribunal against an HMRC decision which rejected VAT adjustments totalling £80,730.52.

The appellant, The Turmeric Co, argued that its supplies of turmeric shots should be classed as food under Group 1 Schedule 8 of the Value Added Tax Act (VATA) 1994 and therefore subject to the zero rates of VAT.

Group 1 Sch 8 VATA determines that food is the supply of anything made for human consumption, except ‘a supply in the course of catering, and any of the excepted items’.

However, VAT is charged on drinks liable for excise duty, such as spirits, beer and wine. This includes fruit juices, bottled water, and other products falling under ‘preparation of beverages’.

The appeal determined whether or not the shots were classed as zero-rated food or a taxable beverage within the meaning of ‘excepted items’.

The turmeric shots, which are made from turmeric roots pulped into liquid with crushed watermelon and pineapple juice, are marketed as a daily performance product and sold in 60ml plastic bottles.

On 26 October 2020, HMRC rejected the appellant’s error correction for the periods 06/17 and 12/19 in the sum of £80,730.52.

The tax authority argued that the supplies of the shots were considered beverages within the meaning of item 4 of the ‘excepted items’ VATA 1994 and were therefore standard rated.

HMRC detailed the ‘beverages test’ in five parts, detailing that an item must be a drinkable liquid that is commonly consumed, and it must be characteristically taken to increase fluid levels.

Regardless of the contents or nutritional value of the shots, the product was clearly designed to be drunk and was liquid rather than a solid, HMRC said.

Thus, the liquidity of the shots made for faster absorption into the bloodstream and so the shots were consistent with many of the beverage hallmarks it listed.

In defence, the appellant retorted that the shots had been marketed for ‘prolonged use’ and purchased by consumers for that reason. On the company’s website they are promoted for their immunity support and health features.

The shots were ‘commonly consumed in one go at a regular time rather than savoured and would not be a suitable lunchtime substitute’.

They cited Karlon Foods Ltd v HMRC [2007], which considered the ‘lunchtime substitute’ test that had been given as an example by the VAT and Duties Tribunal where, rather than having a beer in a pub at lunchtime, two City acquaintances agreed to have ‘Zumo Fresh Blends’ smoothies.

In the High Court, the Judge ruled that ‘the example does, perhaps, indicate one circumstance in which the product might be consumed in place of something (beer, in the example) which is clearly a beverage’.

Making his judgment at the tribunal hearing, Judge Geraint Williams said: ‘In our view, the marketing and customer reviews demonstrate clear consistency in the use to which the shots are put.

‘The shots are consumed in one go on a regular, long-term basis for the sole purpose of the claimed health and well-being benefits.

‘The purpose of the shots is entirely functional: to maximise the consumer’s daily ingestion of curcumin which is achieved by cold pressing the raw ingredients into a liquid.

‘We consider it highly unlikely that a consumer would attempt to ingest the same quantity of raw turmeric in solid form. For the reasons above we decided that the shots should properly be zero-rated for VAT purposes as being a food but not a beverage.’