A recent VAT and duties tribunal case brought back echoes of the great Jaffa cake saga. Those with long memories will recall a series of cases in the 1990’s that culminated in McVities bringing a 12 inch diameter Jaffa cake into court to prove that it was a cake and not a biscuit.
In the current case (not currant cake) two manufacturers of a confectionary item known as a Snowball, Lees of Scotland and Tunnocks, successfully argued that VAT has been assessed incorrectly by HMRC and the Tribunal held that zero rating was appropriate. The sums at stake were not small crumbs but around £3 million pounds. The decision centred on the nature of a Snowball – biscuit or cake? Whilst biscuits attract VAT at the standard rate, if covered or even half covered with chocolate, cakes do not and are zero rated.
The Tribunal seems to have been swayed by the difficulty inherent in eating a Snowball whilst on the move, compared to eating a biscuit. It would be normal to use a tissue or perhaps a piece of paper to hold a Snowball in when eating one due to the sticky mess that the product can become. This is quite unlike a biscuit and whilst both are sweetened confectionary products that are usually eaten with the fingers the Snowball was held to be a cake. The two judges looked at a selection of goodies including Jaffa Cakes, Waitrose Meringues and Bakewell Tarts as well as the Snowball itself before deciding that HMRC got it wrong when ordering VAT to be paid over on the sales of Snowballs.
There are a multitude of weird and wonderful Tribunal decisions involving the VAT liability of food and beverages, ranging from energy bars to toffee apples and kosher fruit juice to wheatgrass juice. It is not yet known whether HMRC will appeal the Snowball case further so if you want to buy one free of VAT you may need to hurry.
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