A. The VAT liability of food products is a minefield. Cakes, biscuits and confectionery in particular have been the subject of a number of tribunals. As a starting point UK case law indicates that the difference between a cake and a biscuit is that a cake gets harder as it goes stale and a biscuit gets softer. This is probably what your client meant by the Jaffa cake test.
The definition of confectionery is any form of food normally eaten with the fingers and made by a cooking process other than baking which consists of a substantial amount of sweetening matter.
Although most bakery products are zero-rated, such as bread, cakes and some biscuits, there are a number of exceptions. Confectionery, and biscuits wholly or partly covered in chocolate are standard-rated. Most difficulties, and disagreements with HMRC, arise in deciding whether a product is a cake or a biscuit or confectionery.
It is so open to interpretation, and this can be affected by the way a product is marketed; where it is displayed in-store; the packaging style, such as individual boxed portions or wrapped in cellophane to display the product, and also whether the product is more likely to be eaten with a meal or between meals as a snack.
Lebkuchen is a traditional baked German Christmas treat similar to gingerbread. HMRC have clearly considered it specifically as it is addressed in their manual. VFOOD6200 states “Lebkuchen are small pieces of chocolate covered gingerbread, these look similar to sweets and are often packed like confectionery but are in fact small cakes.” Therefore, Lebkuchen are zero-rated.
Further reading available on this topic and similar topics in HRMC’s Food Manual and in VAT Notice 701/14 Food.
If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
