In the crazy world of VAT we are always coming across surreal tribunal cases. A recent case caught my eye as it involves two well-known Scottish food companies: Lees and Tunnocks.
The question for the Tribunal was whether a “snowball” was a cake (and not subject to VAT) or confectionery (and subject to VAT at 20%). (This is quite different, of course, to the case some time ago which asked whether a Jaffa Cake was a cake or a biscuit – if you want to know the answer there’s a clue later)
For anyone who is unfamiliar with them, a snowball is a chocolate and coconut covered marshmallow, a favourite with generations of Scottish children (and many adults).
HMRC were adamant that snowballs were confectionery and subject to VAT (no real surprise there – especially as there was £2,800,000 at stake)
The surreal aspects come into their own when the procedure that was followed at the Tribunal is considered. Basically, they had a plate of cakes, including a Jaffa Cake, a Mr Kipling Bakewell Tart, a meringue, a tea cake, and a snowball in front of them, and concluded that the snowball did not look out of place! To quote “the plate looked like a plate of cakes” Now there’s a surprise!
I particularly liked the Judge’s comments:
“A snowball looks like a cake. It is not out of place on a plate full of cakes. A snowball has a mouth feel of a cake. Most people would want to enjoy a beverage of some sort while consuming it. It would often be eaten in a similar way and on similar occasions to cakes; for example, to celebrate a birthday in an office. We are wholly agreed that a snowball is a confection to be savoured but not while walking around or, for example, in the street. Most people would prefer to be sitting when eating a snowball and possibly, or preferably, depending on background, age, sex, etc. with a plate, a napkin or a piece of paper or even just a bare table so that pieces of coconut which fly off do not create a great deal of mess. Although by no means everyone considers a snowball to be a cake we find that these facts, in particular, mean that a snowball has sufficient characteristics to be characterised as a cake.”
Cases like these that make it all worthwhile being a tax adviser!
Let us know what you think. Is a snowball a cake? Or is it confectionery? Or even something else?
(Managed to get to the end without a “having your cake and eating it” reference!)