Today’s Blog is inspired by a comment by Callum Macrae that I read recently on LinkedIn, the employment-oriented social networking site. Callum’s comments, which stirred up my memories of the great Jaffa cake saga, were not actually about Jaffa cakes but concerned a new M&S food line, the M&S strawberries and cream sandwich, yours for just £2.80 a pop!
This sandwich, titled the ‘Great Summer Sensation’, is made with strawberries, whipped cream cheese and brioche style bread. It rang my memory bells because I could see echoes of the long running Jaffa cake saga and I strongly suspect that the VAT liability section of HMRC will be looking at this offering closely, with a view to changing its VAT status from Zero to 20%.
Background
The great Jaffa cake saga started in 1991, when HMRC decided that the small, circular, 54mm wide mini cakes which had three layers: a Genoise sponge base, a layer of orange-flavoured jam, and a coating of chocolate, were actually more akin to biscuits than cake and thus liable to 20% VAT.
The manufactures, McVities, disagreed and the case went to the tax tribunal, which they won. HMRC didn’t like the decision and appealed onwards and upwards, with the case eventually, eventually landing at the Appeals Court, where the VAT office again lost.
Having received an expensive bloody nose, it seems that HMRC/VAT did not learn a lesson and over the years they have regularly gone to court on several other items of confectionary. In the most recent case concerning mega marshmallows: “Marshmallow VAT Liability: I want some more!”, which I blogged about these on 28th March this year, yet again HMRC lost.
The tax office seem to have an endless masochistic fondness for self-inflicted humiliation and clearly do not seem to realise that when yet another similar case of, “is it a cake or is it a sweet snack food” comes before a tax tribunal, the judge will look at previous rulings on similar cases and invariably go with the precedents created by those judgments.
The ‘Great Summer Sensation’
M&S’s novel sandwich, was inspired by the furütsu sando sandwich, which is very popular in Japan, with both offered for sale in the savoury sandwich isle, rather than the confectionary section. So far so good, but similar gooey offerings are often classified as a finger-food, which historically has triggered a 20% VAT liability notice.
The potential problem for M&S is what the public perceives the summer sandwich to be, as in past VAT disputes, both what the public thinks a food is and the style of consumption are key determining factors at tax tribunals. The big question is, does the fact that these gooey, yummy offerings are eaten with your fingers, with the public considering them to be confectionary, enough to change the VAT liability from zero to 20% VAT.
Accountant’s view
The VAT office have not yet shown their hand on this issue, despite the sandwich’s VAT liability being openly discussed in the press. However, given their past record with Jaffa cakes, ‘mega marshmallows’ and a host of other similar products I have a feeling that they may decide to have one more tilt at the windmill.
