When is a cake not a cake? This is an important question in the VAT world, because cakes are zero-rated but other goods – such as chocolate covered biscuits – are not.
My client started a business with an innovative product and wrote to HMRC for confirmation that she was correct in regarding it as a cake and therefore zero-rated.
HMRC declined to give an answer.
Some years later, Revenue officers paid my client a visit and concluded that the nature of the product range and the way it was marketed made it standard-rated.
The Revenue then issued a number of assessments that threatened the business’s survival.
I persuaded HMRC to drop the assessments on the basis that they were unfair because of the way they had responded to the client’s requests when she started in business.
I also persuaded HMRC that various changes in the client’s recipes and her approach to marketing meant that most of product range was now zero-rated.
If your creations are on the borderline between cakes and confectionery, or if you’re uncertain whether or not your produce will attract VAT, please get in touch.