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Protein flapjacks are not cakes for VAT purposes

A recent VAT Tribunal case considered whether flapjacks were cakes and therefore zero-rated for VAT purposes, or an item of confectionery which is subject to VAT at 20%.

HMRC’s rules on food and drink are complex and the number of disputes regarding the matter has led to calls for simplification. Only last year, Morrisons lost a £1m VAT appeal on their Nakd and Organix bars.

Cakes, including flapjacks and brownies, are zero-rated for VAT purposes by HMRC and this is confirmed in HMRC’s written guidance.

During a recent tribunal case, 36 different types of flapjacks produced by Ganbia Milk Ltd were considered and a sample was taken to carry out tests looking at ingredients, taste and texture, marketing and packaging and when the products are typically eaten.

The tribunal looked at changes to eating habits and products since the original zero-rating of flapjacks, ruling that today’s flapjacks are not eaten for afternoon tea, but are commonly eaten on the go, and are not baked, and contained significant amounts of protein. Ultimately the tribunal was concerned not with what the products were called but the way they were consumed.

The case hinged on the definition of cake. As an “item of sweetened prepared food which is normally eaten with the fingers”, the cake is zero-rated as a bakery product.

HMRC’s argument was that the products were cereal bars which are standard-rated and therefore within the list of excepted items including ice cream, confectionery, alcoholic beverages, potato crisps, home brewing products etc.

It was decided that the flapjacks were not cakes and therefore standard rated. They ruled that “the ordinary person would not consider the products in this case to have the texture or appearance of a typical flapjack, let alone that of a typical cake.”

HMRC’s internal guidance states that flapjacks, in general, should be considered to be similar to cereal bars, which are classified as sweets, unless they are comparable to those sold in the 1970s which were widely accepted as cakes.

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