VAT on cakes or biscuits

What is VAT?

Value added tax (VAT) was introduced in 1973 in the United Kingdom. This tax is controlled and collected by HM Revenue and Customs (HMRC), mainly under the VAT Act 1994. VAT is payable on most products and services offered by registered companies in the United Kingdom, and is also applicable on certain goods and services imported from outside the European Union. The standard Value Added Tax rate, since 4-Jan-2011, is 20%. Certain products and services are subject to reduced VAT rate of 5% (such as domestic fuel) or even 0% on certain items like food and children's clothing

VAT rates for goods and services

VAT on bakery items as cakes or biscuits

Even though most traditional bakery products, such as biscuits, bread, and cakes, are zero-rated i.e. no VAT is charged, some confectionery items are standard-rated comprising:

1. Biscuits completely or partially covered in chocolate (or a similar product in appearance and taste
2. Any product of sweetened prepared food, apart from non-chocolate biscuits and cakes, which is typically eaten with fingers

Additionally, biscuits are essentially cakes – as stated by Her Majesty's Revenue and Customs (HMRC) – and VAT free. For example, the Jaffa Cake, a biscuit-sized cakes launched by McVitie and Price in 1927 in the United Kingdom is clearly a biscuit, since it is typically kept in the biscuit aisle in shops. However, as it is coated with chocolate, the Jaffa Cake attracted VAT until a court of law, in the end, ruled in the favour of its manufacturer, McVitie

• Chocolate spread
• Chocolate chips
• Chocolate cups
• Chocolate body paint
• Éclairs’
• Edible cake decorations
• Flapjacks
• Lebkuchen
• Liquid chocolate icing
• Marshmallow teacakes
• Meringues
• Mini-buttons
• Pastries
• Scottish snowballs
• Sponge cakes
• Sweet-tasting dried fruit which are sold as snacks and for home baking
• Toffee apples

• Bars of chocolate
• Bubble gum
• Candy floss
• Chewing gum
• Chocolates
• Gums
• Fruit or nuts with a coating such as chocolate
• Lollipops
• Marshmallow
• Pastilles
• Sherbet
• Sweetened popcorn
• Sweets
• Turkish delight

Bakery products (as cakes or biscuits) and their VAT liabilities

Also Read: HMRC VAT Return Online

VAT‘s on Cake Decorations

If a baker sells uneatable cake beautifications with a cake, such as wedding cakes with bride and groom figures, a baker does not have to consider the supply as a mixed supply and calculate VAT on the beautification except it is obviously a distinct article in its own right – for instance a toy given as ornament on a child’s birthday cake which is undoubtedly intended to be played with post eating the cake. Below mentioned are certain examples of typically found articles used as cake decorations:

VAT‘s on Biscuits

Biscuits covered or partly covered in chocolate or specific other products related in taste and form of chocolate are standard-rated. Below are some examples to help regulate whether a product is zero or standard rated:

Also Read: VAT Payment Deadline Calculator

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.