Snowballs are cakes not confectionery, and therefore zero rated for VAT, the first-tier tax tribunal has ruled.
Lees of Scotland and Thomas Tunnocks have won a landmark ruling that the gooey coconut-covered treat has all the legal characteristics of a cake, in Lees of Scotland and Thomas Tunnock v HMRC [2014] UKFTT 630 (TC). The two companies may now be due a combined VAT rebate of £2.8m.
In reaching its decision, the tribunal took into account ingredients, manufacturing process, appearance, taste, texture, consumption and marketing. The judges agreed that snowballs are definitely not biscuits.
Judge Anne Scott, in her judgment, said: “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.”
As the old Scottish joke goes: "Is that a cake or a meringue? No, you’re right, it’s a cake…" (try it in a Scottish accent), and now snowballs have joined meringues, Tunnock’s tea cakes and jaffa cakes in the tax category of cake.
