Another strange VAT case

Sorry, but it’s VAT and chocolate biscuits again. To recap, if a biscuit is wholly or partly covered in chocolate VAT is due. (Remember, Jaffa cakes were famously ruled to be cakes for VAT purposes, and not biscuits.) HMRC do, however, generously accept that if the chocolate on a gingerbread man is limited to a couple of dots for eyes the covering is “de minimis” and zero-rating applies.

This means that chocolate digestives are standard-rated, but bourbon biscuits are zero-rated because the chocolate is sandwiched between two biscuit halves and isn’t on the outside.

That’s the easy bit.

McVitie’s have launched “Blissfuls” which has a biscuit base, then a layer of chocolate hazelnut, a layer of chocolate and is topped with a McVitie’s logo made of biscuit.

Now the key to this is that the logo is slightly smaller than the base, so does not cover the whole of the biscuit, and you see about 20% of the chocolate layer. Is a Blissful Standard rated, or zero-rated? HMRC say that because the logo doesn’t cover every bit of chocolate, the biscuit IS “partly covered” in chocolate and standard rated. McVitie’s say that because the chocolate isn’t on the very top of the biscuit, the chocolate can’t be a covering, so zero-rating applies. A Tax Tribunal has just sided with HMRC, but I wouldn’t be surprised if McVitie’s Appeal.