In the United Kingdom, VAT of 20% is applied to any chocolate-covered biscuits – however this doesn’t apply to cakes as is known by the famous Jaffa Cakes case when HMRC took McVities to court to argue if the item was in fact a cake or biscuit (it become confirmed that it is infact considered a cake and therefore VAT isn’t added).
The topic comes around every few years (most recently with arguments over flapjacks), but this time was the case of McVities Blissfuls.
If you’re not familiar with these, our courts took the time to describe the product in full detail for you: “The product consists of a biscuit cup with a flat bottom base, approximately 44mm in diameter and 9.5mm in height. It has a layer of chocolate hazelnut, a layer of chocolate and a a McVitie’s logo made of biscuit on top, the circumference of which is smaller than the base. “
And if you’re more of a visual learner, here’s a picture.
The criteria to be exempt from VAT is that the chocolate must not be “wholly or partly covered with chocolate – or some product similar in taste and appearance” as per VATA 1994, Section 30 Section 8 Group 1.
McVities argued that the biscuit encompassed the entire chocolate covering with more biscuit on the top – and that to get to the chocolate, you’d need to bite through biscuit – however this didn’t seem to impress the court as the discussion around the ‘percentage of the biscuit covering the chocolate’ came into play, and that there was no clarification of what ‘partially covered’ would mean.
As such, the court referred to various cases which HMRC had attempted to bring to the courts (when they took on big names including Ferrero and Jacobs) – but they couldn’t get beyond the ‘partially covered’ section (and referred to the dictionary which still didn’t provide a full answer), but determined that it was indeed covered at some level.
Another court room discussion and on this occasion a win for HMRC – the biscuits are covered with chocolate, and so 20% VAT is due on them.