Brownies deemed cakes and so VAT zero rated

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The question of whether a Brownie is a cake or confectionery was recently tested in the First Tier Tribunal (FTT), the determination being that it was indeed a cake and therefore eligible for zero rating for VAT as a food product.

The cake, confectionery and snack food market is a tax minefield for producers and retailers. Many may remember the ‘pasty tax’ scandal, and the subsequent government U-turn, being front page news a few years ago. This time it was the chocolate brownie that was the bone of contention.

The case centred on the manufacturer of Raw Choc Brownies, Pulsin’, submitting an error correction notice for the repayment of output tax previously paid on sales of its Brownies as a standard rated item, subsequently saying that the product was a cake and therefore zero-rated. HM Revenue & Customs rejected the claim saying it was confectionery.

However, having considered its production, ingredients and the VAT classification of similar products, the FTT found that Brownies were cakes and therefore eligible for zero rating.

There is a significant commercial importance as to whether such products are standard or zero-rated. In a practical sense, the difference between products for VAT purposes can sometimes feel rather arbitrary. Professional advice is normally a must in the more contentious product areas such as cakes, biscuits and confectionery. Some products are even zero-rated purely by custom rather than logic or VAT law.