Teacake set to cost taxman £3.5m
Chocolate teacakes were wrongly classed as a biscuit for two decades
The UK Treasury is facing a £3.5m bill, because of VAT wrongly imposed on a Marks and Spencer teacake, the European Court of Justice (ECJ) has ruled.
Customers paid VAT for 20 years before the authorities accepted the product was a cake, which does not command VAT.
The UK argued that paying back the total sum would “unjustly enrich” M&S as customers had paid the money.
This article is both humorous and disturbing to me on a subject I feel strongly about: sales tax and Value-Added Tax.
My belief isn’t about which is better or worse, but rather about how sales tax is regressive and it is an unjust intrusion by the government in that it pretty directly affects how individuals behave by influencing what they buy.
I thought it was an interesting example of such a practice. Notable is the chart included with the BBC article:
VAT ON CAKES AND BISCUITS
How various products are classifed by HM Revenue and Customs
|Zero rated [no VAT]||Standard rated [17.5% VAT]|
|Chocolate chip biscuits where the chips are either included in the dough or pressed into the surface before baking||All wholly or partly coated biscuits including biscuits decorated in a pattern with chocolate or some similar product|
|Jaffa Cakes||Gingerbread men decorated with chocolate unless this amounts to no more than a couple of dots for eyes|
|Bourbon and other biscuits where the chocolate or similar product forms a sandwich layer between two biscuit halves and is not continued on to the outer surface||Chocolate shortbread|
|Marshmallow teacakes (with a crumb, biscuit or cake base topped with a dome of marshmallow coated in either chocolate, sugar strands or coconut)||“Snowballs” without such a base are classed as confectionary|
|Caramel or “millionaire’s” shortcake consisting of a base of shortbread topped with a layer or caramel and (usually) chocolate or carob||Shortbread partly or wholly chocolate-covered|
|Flapjacks||Cereal, muesli and similar bars with honey or other added sweetening matter|
Silliness at a high level, but dangerous too.