VAT on Milk – Including milkshakes and alternatives

As some of the most common items on the weekly shopping list, dairy products are sold by countless businesses across the UK – from newsagents to major supermarkets. When supplying these products, it is important to know when VAT is or is not applicable. This brief guide will tell you what you need to know.

Please note that this blog covers milk sold for off-premises consumption, such as products sold in supermarkets, convenience stores, or delivered for home use. More information on milk and other food/drinks supplied as part of catering can be found in our dedicated “VAT on food” blog.

Is there VAT on milk?

The government considers milk to be a basic essential food item – it is, therefore, typically zero-rated for VAT. Businesses selling milk to customers are not required to charge VAT on their sales as the VAT is 0%. It’s important to note that this is not the same as being exempt.

This includes all types of dairy milk, such as milk from cows, goats, and sheep.

Are there exceptions to the zero-rating of milk?

VAT is almost never simple, and milk products are no different. While milk is typically zero-rated, there are exceptions.

• Any beverage considered a “Sports Drink” is standard-rated, even if it is milk-based. A sports drink is defined as a drink that is “marketed as a product designed to enhance physical performance, accelerate recovery or build bulk”. A common example is a pre-mixed protein shake. This includes syrups, concentrates or powders that can be made into a liquid by the consumer.

VAT on milkshakes

Excluding sports drinks, most other drinks considered to be “preparations of milk” are zero-rated. This includes Ovaltine, Horlicks and most milkshakes.

Milkshakes are a little more complex, with two categories to be considered.

• If the product is a flavoured milk-based powder that provides a complete milkshake when mixed with water (such as Nesquik powder), it is zero-rated.
• If it is simply a flavouring, it is typically standard-rated. However, there are several exceptions to this.

A tribunal case by R Twining & Co, relating to the Max for Milk brand of Ovaltine powders, ruled that the strawberry and chocolate-flavoured varieties were zero-rated, while the banana-flavoured variety was standard-rated.

Due to the multiple layers of complexity associated with milkshakes, it is advisable to seek advice if there are queries about VAT treatment.

VAT on baby formula

Baby formula is a milk-based powder that is mixed with water to serve. Baby formula is zero-rated for VAT as a food. This includes pre-mixed baby formula, such as the Aptamil Ready to Drink range.

VAT on alternative milks (soy, oat, almond, etc)

Alternative kinds of milk are becoming increasingly common due to the growing popularity of dairy-free dietary preferences or needs. These products are typically zero-rated as they are deemed necessary replacements to those allergic or intolerant to dairy products. This includes both plain and flavoured varieties of soya, pea, oat, almond, and rice milk.

VAT on milk-based alcoholic beverages

VAT is charged at the standard rate of 20% on all alcoholic beverages, including those which are milk-based. You can learn more about the VAT treatment of alcoholic beverages in our recent blog on the topic.