02 Jul 2014

First Tier Tax Tribunal makes it clear what is a ‘cake’ and what is a ‘biscuit’

First Tier Tax Tribunal makes it clear what is a ‘cake’ and what is a ‘biscuit’

Catriona Milne, Solicitor, analyses the recent First Tier Tax Tribunal case that looked at what was a cake and what was a biscuit for the purpose of considering whether the sweet treat attracts VAT or not.

Catriona Milne, Solicitor, analyses the recent First Tier Tax Tribunal case that looked at what was a cake and what was a biscuit for the purpose of considering whether the sweet treat attracts VAT or not.

The BBC have reported that two Scottish confectioners have successfully argued that a ‘Snowball’ is a ‘cake’ for tax purpose, saving themselves £2.8 million in tax, as appeal judges agreed that a ‘Snowball’ should be free from VAT. 

Original claims for a £2 million VAT rebate by Coatbridge-based Lees of Scotland Ltd and for a £800,000 VAT rebate by Uddingston-based Thomas Tunnock Ltd, were rejected in 2012 as HM Revenue and Customs was adamant that they were confectionery.

In this particular ‘biscuit –v- cake’ argument, the tax tribunal were asked to consider whether a ‘Snowball’ had the characteristics that an average customer would consider to be akin to a cake. Their palatable decision that a ‘Snowball’ had both the look and texture of a cake will be a big hit with confectioners and consumers alike.

The decision, which was made at the First Tier Tax Tribunal Lees of Scotland & Thomas Tunnock v HMRC (Snowball case) in Edinburgh, was made after the judges were presented with a plate of Jaffa Cakes, Bakewell tarts, tea cakes, Lees Snowballs, Waitrose meringues and mini jam snow cakes during the hearing.  At the tribunal, Judge Scott said it was not disputed that Snowballs were a "sweetened prepared food which is normally eaten with the fingers" and that everyone "agreed that a Snowball is certainly not a biscuit." Snowballs are described as "soft fluffy mallow with a chocolate coating and sprinkled with the finest flakes of coconut to create a delicious sweet treat.”

The results of this decision will now be food for thought for HM Revenue and Customs when considering whether their next challenge is likely to snowball out of control. 

Catriona Milne, Solicitor



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