HM Revenue and Customs Brief 36/14 - VAT liability of a food item
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Published 13 October 2014
Purpose of this brief
This brief sets out HM Revenue and Customs’ (HMRC) position
following the decision of the First Tier Tribunal. The case concerned
the VAT liability of a food item and whether or not it was
confectionary (standard rated) or a cake (zero-rated)?
This Revenue and Customs brief is aimed at businesses that
manufacture and/or sell this type of confectionery known as ‘snowballs’
that are the same as those manufactured by Lees of Scotland and Thomas
Both taxpayers challenged a previous ruling that ‘snowballs’
were standard rated confectionery by claiming they were also cakes and
submitted voluntary disclosures for VAT they claimed was overcharged. HMRC disagreed
with this view and so the matter was decided by the First Tier Tribunal.
The Tribunal Decision
The Tribunal considered what factors should be considered when
identifying whether a product is a cake. They used a number of factors
derived from the authorities that fell to be weighted in the balance,
- process and manufacture
- unpackaged appearance
- taste and texture
- circumstances of consumption
- self life
- ‘how it behaves’ after it is removed from packaging
In keeping with previous classification exercises the Tribunal
acknowledged that there are no objective tests that can be imposed to
determine whether a particular item of confectionery is or is not a
cake, and that each case must turn on its own particular facts.
The Tribunal did not dispute that these snowball products are
confectionery. After considering all of the above factors they accepted
that whilst these snowballs do not have all of the characteristics of a
cake they decided that they do have sufficient characteristics of a
cake for them to be characterised as a cake. This means that they can
be zero rated for VAT purposes.
Changes to HMRC’s policy
consider that the borderline between confectionery and cake causes few
problems, but with the ever changing selection of confectionery
available there will always be some products whose status as cakes is
not necessarily self-evident. These snowballs are an example of this
type of product. The Tribunal has made its decision based upon the
particular facts before them and HMRC have
accepted that decision and will be updating their guidance in respect
of this type of snowball in due course.
In this case a ‘snowball’ was found to be a dome of
marshmallow coated in any combination of the following:
- sugar strands
which may or may not include a jam filling. Of course,
products which are also called ‘snowballs’ but not the same as those in
this case may not be zero-rated.
of the Tribunal ruling
As a result of this Tribunal decision HMRC is changing
its policy on the VAT classification of this type of snowball
Guidance and Public Notice 701/14 Food will be updated shortly to
reflect these changes in VAT treatment.
If you have supplied ‘snowballs’ that are the same as those in
this case, you may wish to refer to Public Notice VAT 700/45 ‘How to
correct VAT errors and make adjustments or claims’ explains how to go
about claiming a refund. Any claims made will be subject to the unjust
enrichment rules and the 4 year CAP in line with normal HMRC procedures.
About the Author
© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2014-10-16 09:02:11 in Tax Articles