When is a cake not a cake?

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.

To discuss how this may affect your clients or your business, or to talk about a VAT issue in general, please get in touch.
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