To mark the news that Turkish food giant Yildiz has swallowed up the maker of Mcvitie’s, United Biscuits, we look back at the unusual VAT tribunal case of 1991 and the curious case of the Jaffa Cake.
Customs and Excise had accepted since the start of VAT that Jaffa cakes were zero-rated as cakes, but always had uncertainties about whether this was actually correct. Following a review, the department reversed its view and Jaffa cakes were then ruled to be biscuits and therefore standard-rated. United Biscuits then appealed against this decision.
The Tribunal listed the factors it considered in coming to a decision as follows:
Firstly, the name was barely taken into consideration at all throughout the case. Customs and Excise argued that Jaffa cakes were in size more like biscuits than cakes, and were also sold in packets more similar to biscuits than cakes. Also, they were generally found for sales with biscuits rather than cakes, and were eaten with the finger whereas a cake is more often expected to be eaten with a fork.
However, United Biscuits argued that the batter used to prepare the Jaffa cakes was the same as a traditional sponge cake – a thinner batter as opposed to the thick dough used for biscuits. Also, when left to go stale, Jaffa cakes go hard like a cake rather than soft as biscuits do. Jaffa cakes couldn’t be snapped as biscuits are, but instead were soft with the texture of a sponge. And the sponge part of the Jaffa cake made up the majority of the product in terms of the bulk and texture when eaten.
All things considered, after both sides produced valid arguments, the tribunal thought they had enough characteristics of cakes to be accepted as such, and they were therefore zero-rated. This conclusion may have been helped by the presentation of a 12 inch Jaffa Cake to prove its cakey properties! But it remains a moral victory of chocoholics over the tax man.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.