Lucozade Sport is a drink not a food, tax tribunal rules

The maker of sports energy drink Lucozade has lost an attempt to prove that it is a functional food rather than a beverage, with the Tax and Chancery Upper Tribunal ruling that Lucozade Sport is mainly drunk for hydration and pleasure.

In a bid to classify Lucozade Sport as zero-rated for VAT, the drink’s manufacturer GlaxoSmithKline (GSK) argued that Lucozade’s nutritional qualities should take it outside the category of beverage as it is primarily consumed for its nutritional properties.

GSK markets Lucozade Sport, which is sold in both powder and gel form, as a ‘Body Fuel’. The company claimed that the drink’s ‘scientifically-formulated’ mixture of 30 nutritional ingredients improves high-intensity sport performance and it should, therefore, be classed as a food product.

However, Mr Justice Newey concluded that “consumers drink Lucozade Sport for hydration, refreshment and pleasure”, adding that it is “not purchased or consumed on account of its nutritional ingredients”.

He ruled the same was true of Lucozade Sport in powdered form as it is “chemically equivalent to the ready-to-drink product when water is added”.

Newey J went on to say that “a significant proportion of consumption of Lucozade Sport is by armchair enthusiasts”.

Establishing that Lucozade Sport is not a food product Newey J later addressed whether it can be classed as a beverage stating that whether a liquid is a beverage is a matter of ordinary language.

“Plainly, not every liquid that’s consumed is a beverage – gravy provides an example, ” Newey J said. “I should not have thought, for instance, that an aspirin solution would ordinarily be considered a ‘beverage’.

“On the other hand, there can be few liquids which would be regarded as ‘drinks’ but not ‘beverages’,” he added.

Hogan Lovells tax partner Greg Sinfield agreed with the judge’s decision.

“The area of food and VAT has always given rise to interesting conundrums such as is a Jaffa Cake a cake or a biscuit? Is a breakfast cereal bar food or confectionery?” he said. 

“The GSK case is an example of the tribunal determining the everyday meaning of the word ’beverage’ in the VAT Act and deciding that it applies to a sports drink.”

KPMG solicitor Hilary Stone instructed Essex Court Chambers’ Roderick Cordara QC for GSK, with Monckton Chambers’ Nicholas Paines acting for HMRC, instructed by general counsel Anthony Inglese. 

Cordara recently led a similar case on behalf of Innocent Limited, the maker of fruit smoothies.

In that case Cordara argued that Innocent’s flagship product was not a beverage because its ingredients countedtowards two of the Government’s recommended five portions of fruit and vegetables a day and should, therefore, be classed as a fruit salad.

Justice Barbara Mosedale rejected the argument on the grounds that smoothies were intended, and sold, as a drink.