After the “Jaffa Cake” and “Gingerbread Man” cases, the first tier tribunal have now bowled the tax office a googly in the case of the “Snowball”, described as “a soft fluffy mallow with a chocolate coating and sprinkled with the finest flakes of coconut “.
Originally, these were treated as cakes and were therefore zero-rated for VAT purposes. HM Revenue & Customs then decided that they were, in fact, confectionery and therefore subject to standard-rated VAT. This added an immediate 20% to the retail price of this scrumptious delight. No wonder, then, that the two manufacturers appealed this decision to the tribunal.
The tribunal was asked to consider whether a Snowball was a cake, and came down in favour of the taxpayer, saying “A snowball looks like a cake. It is not out of place on a plate full of cakes. A snowball has the mouth feel of a cake. Most people would want to enjoy a beverage of some sort whilst consuming it. It would often be eaten in a similar way 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 whilst 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 the 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.”
Once again, a huge amount of money rested on this decision. It is estimated that the two manufacturers will now receive a VAT rebate of nearly £3m between them. An expensive way of proving yet again how complex this apparently simple tax has become.