Phil Costigan, General Secretary of the Irish Health Trade Association (IHTA), gives the lowdown on issues around VAT in Health Food Business trade magazine – December 2016.

Here at the IHTA, we have been vigilant and active in relation to the rise of VAT changes, which resulted in a broad range of food supplements having standard VAT (23 per cent) imposed where previously zero rating applied. For readers supplying food supplements to the Irish market, it would be prudent to be familiar with these developments.

Background

The initial changes came about when the former Appeal Commissioners (AC) ruled that certain products supplied for sports performance and muscle building were not a supply of food and should therefore be liable to 23 per cent VAT. Following that, eBrief 70/11 was published, which stated that zero rated food supplements must provide similar sustenance to that which would be obtained from a normal healthy diet and that they should also be regarded as ‘food’ within the ordinary and everyday meaning of that word.

In addition, eBrief 70/11 stated that food supplements being vitamins, minerals and fish oils could generally avail of the zero VAT rate but it did not provide any examples of the other types of food supplements that could also avail of the zero rate.

Subsequently, it became apparent that Revenue was building on the AC ruling and extending the application of 23 per cent VAT to other types of food supplements not specified in eBrief 70/11, examples of such supplements include probiotics and amino acids.

Developments

The IHTA disagreed with this wider interpretation of the AC’s actions and we immediately engaged in dialogue with Revenue’s VAT Interpretation Branch (VIB). We advocated that in the interests of fairness, efficiency and proper market management, any review of VAT be carried out in a systematic manner and we submitted a framework document to Revenue outlining a practical method for assessment.

This model was not adopted by Revenue and soon it became clear that the marketplace contained a large number of essentially similar, and in some cases identical, products being were classified at different rates – some at 23 per cent, some at zero.

Disorganised rulings undermine the integrity of our industry sector and works against compliant taxpayers so we instigated a formal complaint to the Ombudsman, which, to date, has not provided any meaningful response.

Current situation

Matters are now compounded by Revenue amending its guidance (August 2016) to further restrict the zero VAT rate for food supplements by including for 23 per cent VAT products that contain vitamins, minerals, food ingredients etc. but whose purpose is other than for sustenance, for example, skin, hair, nail, eye improvement products, detox, antioxidant, immune, digestive, joint support, cholesterol etc. Revenue has also made it clear that this list is not exhaustive.

We are all in this together

The IHTA has produced a comprehensive submission to Revenue on the definition of food within the Value Added Tax Consolidation Act 2010. We do not know at this time the extent of its influence on Revenue thinking and practical application processes.

The IHTA has also expended significant resources, people hours, expertise and funds in negotiating and consulting with Revenue, tax consultants and seeking legal counsel opinion. We are now calling out to diligent suppliers of food supplements to the Irish market on the need to work together to face down the alarming developments on VAT assessment on food supplement, join us – this is not an IHTA member company problem, it is an industry problem. Email Phil at info@ihta. org or phone +353 656848911.

Phil Costigan is General Secretary of the Irish Health Trade Association (IHTA), which represents the interests of manufacturers, importers and distributors of natural health products in Ireland. The principal aim of the IHTA is to assist member companies in promoting the wellness of all people in Ireland. For more information on the IHTA, visit www.ihta.org