Blissful biscuits

Blissful biscuits

The rules about whether food is standard rated or zero-rated for VAT purposes are notorious for having some provisions that are open to interpretation. As has been shown in a recent case. United Biscuits (UK) Ltd manufactures McVitie’s ‘Blissfuls’. For the benefit of those of you who have not sampled them, they consist of:

  • A biscuit cup with a flat bottom base;
  •  A layer of chocolate hazelnut and a layer of chocolate;
  •  A McVitie’s logo made of biscuit on top, which does not cover the entire top. So leaving some of the underlayer of chocolate exposed .
  • The company zero-rated this product
    as food.

HMRC argued that the product should be standard rated, as it fell within the exception for ‘biscuits wholly or partly covered with chocolate or some product similar in taste and appearance’.

The company claimed that:

  • The product’s lid served more than a decorative function, as it ensured that the product kept its shape and provided a crunchy texture before the consumer tasted the chocolate filling;
  • To be a covering, the chocolate must be the first part of the biscuit to be bitten into;
  • As the chocolate was not the first part, it was simply a filling, and the exception did not apply

The Tax Tribunal agreed with HMRC that the product was standard rated. As the legislation requires the product to be wholly or partly covered with chocolate. The term ‘partly’ should be interpreted in such a way that it could apply to any part of the biscuit that was covered to some extent with chocolate. The key question was what covered the remaining area of the product that was not covered by the biscuit logo lid. The judge felt that the ordinary person in the street would say that the biscuit was covered by the logo biscuit lid and ‘in part’ by a layer of chocolate. Being partly covered in chocolate, it fell within the exception to zero-rating and the standard rate of VAT applied. Losing a VAT case like this can mean having to pay extra VAT, interest and penalties going back many years

If you are involved in a food or drinks business, don’t fall into a similar tax trap. Check with us if you are uncertain of how your products should be treated for VAT

The complete Spring Newsletter can be found here