A first tier tax tribunal in Edinburgh has ruled ‘snowballs’ should be classed as cakes and therefore be zero-rated for VAT.
In the tribunal decision published last week, [Lees of Scotland & Thomas Tunnock v Revenue & Customs], the court found that a snowball does not have all of the characteristics of a cake but displays “enough of the characteristics of a cake that it should be classified as such”.
The coconut-covered confectionary item, popular in Scotland, are made by Lees of Scotland and Thomas Tunnock. Both companies had appealed to the tribunal after HMRC decided that snowballs should be standard rated.
The tribunal then had to decide whether a Scottish snowball had the characteristics that ordinary people would consider to be a cake, including the ingredients used, its manufacture, unpackaged appearance, taste and texture, circumstances of consumption, packaging and marketing.
In its written decision, the tribunal concluded that: “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. 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 characterised as a cake.”
Courtesy of AccountingWeb