The Great British Bake off and interesting facts about VAT

“What is she on about?” I can hear you all thinking straight away how can there possibly be anything interesting about VAT and what has that to do with the Great British Bake Off?

Well, let me elaborate. For the uninitiated of you, the Great British Bake Off is a UK TV programme which features 12 contestants who go head to head in a weekly battle to see who can bake the best cakes and biscuits.

In this week’s competition the contestants were given the technical challenge of making 12 Jaffa Cakes.

Jaffa Cakes have long been the topic of discussion for VAT purposes. During the early 90’s the UK VAT Department (otherwise known as HMRC) asked Jaffa Cake manufacturer McVitie’s to pay VAT on their sales because they believed the Jaffa Cake was a biscuit. McVitie’s took the case to court as they disagreed arguing that VAT was not due on sales.

HMRC’s argument was based around the fact that as the Jaffa Cake is sold in the biscuit aisle, is packaged like a biscuit, and looks like a chocolate-covered biscuit then it is a biscuit and therefore it must have VAT applied.

McVitie’s highlighted that the base of the Jaffa Cake is a cake sponge. It further argued that when biscuits go stale they go soft, whereas when a cake goes stale, it goes hard. On the very rare occasion that a Jaffa Cake gets left in the biscuit tin in my house I can confirm that it goes hard thus confirming a Jaffa Cake is made of cake not biscuit.

This argument convinced the courts it was indeed a cake and so no VAT was due on sales of Jaffa cakes.

In the UK, VAT is not applied to items of food which are considered to be the kind fit for human consumption. Although I am not quite sure how necessary cake really is for survival I do however have a very sweet tooth so I am fully supportive of the tax authorities view that cake is food and does not have VAT applied on its sale.

On the other hand a chocolate-covered biscuit does have VAT applied as it is seen to be a luxury product and not considered to be a food item essential for maintaining wellbeing.

……Food for thought the next time you dip your hand in the cookie jar!

Written by Samantha Snow, Client Services Manager