Michael McGrath (Cork South Central, Fianna Fail)
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243. To ask the Minister for Finance the position regarding the reclassification by the Revenue Commissioners of smoothies and milk-based drinks for VAT purposes, which has resulted in the standard 23% VAT rate being applied; if his attention has been drawn to the likely impact this will have on the sector; the basis for the reclassification; if the Revenue Commissioners are the final arbiter on the issue; and if he will make a statement on the matter. [2562/15]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that "smoothie" is a generic term for a range of blended products containing, among other things, fruit juices and other products derived from fruit, frozen yogurt and/or ice cream and, in some cases, chocolate and confectionery products.

Paragraph 8(1) of Schedule 2 of the Value-Added Tax Consolidation Act 2010, provides for the application of the zero rate to food and drink, but specifically excludes, from the zero rate, frozen yoghurt, juice extracted from, and other drinkable products derived from fruit or vegetables.  Accordingly, frozen yoghurt and smoothies are taxable at the standard rate (currently 23%).

The VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply.  The EU VAT Directive generally provides that supplies of goods and services be chargeable to VAT at the standard rate. Member States can retain historical zero-rated VAT treatment under Article 110 of the EU VAT Directive, where a good or service was zero rated on and from 1 January 1991.  Ireland applies the zero rate to most food. In this context, it is not possible to apply the zero rate to any new food and drink items that have not already applied at the zero rate.

Interpretation of VAT law by the Revenue Commissioners is guided by the decision of the Appeal Commissioners and the Courts and decisions of these institutions may lead to changes in interpretation such as those that relate to smoothies. VAT cases before these fora have been determined on the basis that food products that may benefit from the zero rate must fall within the ordinary and everyday meaning of "food" and not be excluded from the zero rate by the goods specified in Section 8 of the Second Schedule. Any business that is dissatisfied with the rate of VAT has a number of avenues of redress available including internal review by another Revenue officer, external review by a nominated person and formal appeal avenues to the Appeal Commissioners and onwards to the Courts.