In Telamara Ltd v HMRC [2025] TC09646, the First Tier Tribunal (FTT) found that nitrous oxide (N2O) for culinary use was not food of a kind for human consumption. It was therefore standard-rated for VAT.
Telamara Ltd (Telamara) supplied cylinders of nitrous oxide, N2O, to wholesalers and catering companies who used the cylinders to infuse the gas into other ingredients when making foams, mousses and infused drinks.
- When Telamara started trading, a director had contacted HMRC twice regarding the VAT liability of the N2O canisters, but other than pointing him to public guidance, they were unable to assist.
- Telamara zero-rated supplies of the canisters on the basis that they were ‘food’.
- Believing that the supplies were in fact standard-rated, HMRC issued Assessments for the VAT return periods 02/20 to 05/21 totalling £1,477,582.
- Telamara Appealed to the First Tier Tribunal (FTT).
Item 1 of Group 1, Schedule 8, VATA 1994 zero rates ‘Food of a kind used for human consumption’.
The FTT found that:
- There was no question that the cylinders contained N2O of a kind used for human consumption, but did they contain food?
- The Oxford English Dictionary defined food in the context of the phrase 'of a kind used for human consumption' as 'any nutritious substance that people eat or drink in order to maintain life and growth'.
- N2O has no nutritional content in the form of fat, protein, carbohydrate, fibre, or sugar.
- The N2O would not be eaten on its own; it formed an ingredient of all of the food substances into which it was incorporated.
- N2O is odourless, colourless, and tasteless, although, when used as intended, it affects the structure, texture, and mouthfeel of the food it is mixed with.
- In this case, N2O was used as a food additive.
- The VAT rating of food additives can vary, depending on whether the additive alters the food itself or is used for cosmetic purposes.
- HMRC accept that bicarbonate of soda, when used as a leavening agent in baked goods, is a food.
- Carbon dioxide, when used in beer production to form a foamy head, is not considered to be food because the gas does not alter the beer itself; its use is cosmetic.
- As with carbon dioxide in beer, the N2O did not change the food itself; only the form in which the food was consumed was altered.
- The N2O supplied was food grade and recognised and regulated as a food additive. However, food grading and E-number regulation are focused on the safety of substances offered for human consumption, and they do not determine that they are in and of themselves food for the purposes of assessing whether VAT is due.
- The two schemes of legislation served different purposes.
The appeal was dismissed.
Useful guides on this topic
Food, catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises?
Assessments: Best judgement & time limits
What is a 'best judgment' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgment assessment? What are the time limits for a VAT assessment?
Appeals: VAT
How do I appeal a VAT penalty? How can I request a Statutory Review? How do I appeal an HMRC decision?
External link