Just last week, Scottish First Minister Nicola Sturgeon evoked (relative) controversy when asked whether she thought Jaffa Cakes were cakes or biscuits – answering biscuits.[1]. In 1827, also-Scottish food manufacturer, McVitie’s (now a Plaidis subsidiary) introduced the Jaffa Cake to Britain. Ever since they have become a staple item in food cupboards across the UK. In fact, a 2018 YouGov poll ranked them Britain’s fourth favourite biscuit[2]– to which the tabloid media’s (admittedly somewhat endearing) response manifested as the headline: ‘JAFFA FAKE’.[3] Both the poll and Sturgeon dubbing them ‘biscuits’ clearly opened an old wound. Regardless, the question of ‘cake or biscuit?’ has a somewhat interesting legal story.
In 1991 in United Biscuits (LON/91/0160), a VAT tribunal (I kid you not) held that they were in fact cakes. Arising as a matter of VAT, the (now-repealed) Value Added Tax Act 1983 read that neither cakes nor biscuits are subject to VAT – but biscuits with a chocolate covering are; [4] to the standard 17.5% rate.[5] Somewhat hilariously, this caused the tribunal to consider the age-old question: biscuit or cake?
On its facts, this does appear quite trivial. However, given McVitie’s are market leaders (United Biscuits, their holding company, were once a FTSE 100 constituent) – Her Majesty’ Revenue and Customs (‘HMRC’), as the complainants, would have been granted enormous revenue if successful. Accordingly, HMRC argued they were biscuits whilst McVitie’s successfully defended their classification as cakes.
Ultimately, the tribunal acknowledged that Jaffa Cakes “had characteristics of both cakes and biscuits” but held more so of cakes, thus were cakes.[6] In their reasoning, the tribunal listed several factors used to reach this conclusion:
Despite the overall decision, the tribunal concurred with the Shakespearean sentiment – that ‘a rose by any other name would smell as sweet’[7] i.e. that the names of things do not affect what they really are. Thus, they noted the product’s name to be only a “minor consideration”. Additionally, it was acknowledged the ingredients used were more akin to that of a sponge cake than a biscuit, as was the texture: soft and friable as opposed to easy to snap, like a biscuit. Further, it was the fact the sponge part formed a “substantial part” of the Jaffa Cake that led the tribunal to acknowledge they had characteristics of both cakes and biscuits. However, the tribunal cited size, marketing, and packing to be more like that of a biscuit than a cake. Thus, they were cakes and zero-rated VAT.
In 2014, another similar case arose but with regards to Lees of Scotland’s and Tunnock’s ‘Snowballs’. The issue being: were they confectioneries or cakes? Judge Anne Scott said that “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 characterized as a cake.”[9]
The methodology for this was somewhat unconventional. During the hearing, the Judges were presented with a plate of Jaffa Cakes, Bakewell tarts, tea cakes, Lees Snowballs, Waitrose meringues and mini jam snow cakes. Lees and Tunnock’s insisted on their similarity to Jaffa Cakes, thus should be tax-free. On this, Judge Scott said:
“We found that the plate looked like a plate of cakes. We were also left with samples of all of these, together with Tunnock’s Snowballs.”
“We tasted all of them, in moderation, either at the hearing or thereafter.”
“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”[10]
Certainly, an interesting day as a tribunal Judge! Lees and Tunnocks would have faced a combined £2.8m tax bill had the tribunal decided they were biscuits.[11]
Nearly thirty years later after the Jaffa Cake tribunal, we are still able to enjoy VAT-free Jaffa Cakes (and Snowballs) but only in their classification of ‘chocolate-covered cakes’ rather than ‘chocolate-covered biscuits.’ Obviously, the latter would take the cake (or indeed biscuit) as too much of decadent luxury! Despite this, the tribunal’s decision is not one the public seem to reconcile with – albeit by a narrow margin. In 2017, a YouGov poll found 51% of the British public thought they were biscuits, whilst only 38% thought they were cakes (11% said they did not know).[8] Obviously, the public is unaware they can, in fact, have their cake and eat it – via the VAT advantage. Alternatively, perhaps they are aware but view it as a biscuit due to (for want of a better phrase) ‘Nanny State’ beliefs concerning unhealthy food.
On that note, in July Boris Johnson announced the ‘Better Health’ campaign to combat obesity in the UK – after crediting his own weight as detrimental to his health whilst ill with coronavirus. Indeed, a report from Public Health England shows the NHS spends an estimated £6.1 billion annually treating overweight and obesity-related ill-health.[12] Despite this, Obesity Forum warned Johnson’s refusal to extend the sugar tax to fly in the face of his overriding objective.[13] It shall certainly be interesting to see how and if more unhealthy foodstuffs are subject to VAT.
References
[1] https://theferret.scot/nicola-sturgeon-claim-jaffa-cakes-biscuit/
[2] https://yougov.co.uk/topics/food/articles-reports/2018/12/17/britains-top-five-biscuits-revealed
[3] https://www.thesun.co.uk/news/9180526/jaffa-cake-biscuit-cake-favourite/
[4] Value Added Tax Act 1983, Schedule 5 Group 1
[5] http://www.jaffa-cakes.com/jaffa-cakes-biscuits-name#:~:text=Under%20UK%20law%20no%20value,standard%20VAT%20rate%20of%2017.5%25.
[6] https://www.gov.uk/hmrc-internal-manuals/vat-food/vfood6260
[7] Romeo and Juliet, Act II, Scene II
[8] https://yougov.co.uk/topics/food/survey-results/daily/2017/03/06/802a0/3?utm_source=twitter&utm_medium=website_article&utm_campaign=jaffa_cakes
[9] Lees of Scotland Ltd & Anor [2014] TC 03754, at paragraph 53
[10] Lees of Scotland Ltd & Anor [2014]
[11] https://www.bbc.co.uk/news/uk-scotland-scotland-business-28055633
[12] https://www.gov.uk/government/news/third-year-of-industry-progress-to-reduce-sugar-published
[13] https://www.independent.co.uk/news/uk/politics/sugar-tax-extension-junk-food-ban-boris-johnson-a9635611.html
A great piece of writing!
Thank you!