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What is a Cake? Tax Tribunal Rules

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

Tribunal judges resorted to a Great British Bake Off-style taste test before ruling that the makers of popular ‘Snowball’ snacks should receive VAT rebates totalling more than £2.8 million – because they are technically cakes.

Confectioners Lees of Scotland Limited and Thomas Tunnock Limited engaged in a sticky debate with HM Revenue and Customs (HMRC), insisting that Snowballs – made of chocolate-coated mallow topped by coconut flakes – should have the same exemption from VAT as teacakes. HMRC was equally adamant that they are ‘confectionery’ and subject to the standard rate of VAT.

Two judges at the First-tier Tribunal (FTT) had been presented with a plate of Jaffa Cakes, bakewell tarts, teacakes, Lees Snowballs, meringues and mini jam snow cakes as they deliberated. After indulging in the snacks – ‘in moderation’ – they observed, “We found that the plate looked like a plate of cakes.”

Ruling that a Snowball has sufficient characteristics of a cake to be viewed as such for VAT purposes, the FTT noted, “It looks like a cake. It is not out of place on a plate full of cakes. It has the mouth feel of a cake…most people would want to enjoy a beverage of some sort whilst consuming a Snowball. It would often be eaten in a similar way and on similar occasions to cakes – for example to celebrate a birthday in an office.”

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