Senior HMRC Hobnob inspector at work
Following last week's post on the mysteries of VAT, it's worth noting the latest developments in the Great Chocolate Coating War:
"Confusion over the chocolate-covered teacake - a dome of marshmallow on a biscuit swathed in milk chocolate - could cost the British government £3.5m after an EU court adviser said the retailer Marks & Spencer should get a refund of the tax it paid during the decades that tax authorities insisted they were biscuits."
Never in the field of edible coatings has so much misery been caused by a sales tax.
Let's remind ourselves of the history.
When the French initially forced us to introduce their abominable tax system in 1973, they kindly permitted us a derogation so that food could be zero rated. But the question then became what is food?
Easy you say- food is stuff you eat.
Ah, such innocence.
You see, bread is food. We can all agree that. And following the famous Marie Antoinette ruling, so is cake. Eccles cake, Bath buns, Dundee cake- they're all food.
And biscuits? Are they food?
Well, yes, they are. Viennese whirls, garibaldi, bourbon creams- all traditional British grub, and all subject to zero VAT.
But what about Hobnobs?
Exactly. That's where the problems start. Because whereas your standard fare Hobnob is VAT free, first class chocolate Hobnobs (milk or plain) get treated very differently. Their chocolate coating lifts them from being mere "food" off up into the ambrosial realm of "luxury biscuits". And whereas everyday biscuits are zero rated, luxury biscuits are whacked for the full 17.5%.
The chocolate Hobnob's one chance of escape is to prove it's a cake. Because cakes get it easy. Cakes are allowed to be smothered in disgracefully thick lashings of the darkest most velvety Belgian chocolate, and nobody can touch 'em for it! They remain zero rated.
However, the Hobnob would find it pretty tough to prove cakeness. True, the chocolate covered teacake made it, and the Jaffa Cake successfully claimed cake nationality in a landmark 1991 case (see excellent summary at NiceCupOfTeaAndASitDown.com). But as you may have spotted, they both have "cake" in their name. Plus, according to the court, they both display other "cake-like characteristics" (eg not going soggy if you leave them out- although extensive experiments at Tyler Labs have cast doubt on that claim).
The whole distinction is of course entirely arbitrary, made even more absurd by the fact that if a biscuit's chockie is inside rather than outside, it's zero rated. NiceCupOfTeaAndASitDown.com provides detailed reviews of several excellent zero-rated inside chockie bickies, including the world leading Bahlsen PICK UP:
"It was somebody at Bahlsen who told me of some intricacies of VAT law concerning chocolate and its placement, and its my understanding that such an arrangement of biscuit and chocolate would be VAT free as inner chocolate is not considered 'Luxurious'...
...As you bite into this very solidly assembled biscuit your teeth which have made it through the crispy outer are suddenly arrested by the choc monolith forcing you to change into a lower gear and with a firm bite snap off a piece. This is a non standard biscuit eating experience."
Sounds like we might need to check them out.
Meanwhile, the definition of food has plenty of other grey areas.
Seeds and plants used to grow food are zero rated, whereas the same things bought for "ornamental effect" are taxed at 17.5%. But again, what's food? Nasturtians are taxed, but you can eat them. Asparagus, globe artichokes, and rosemary are all VAT free yet are widely used for ornamental planting.
And the man in Tyler's local garden centre reckons mistletoe is edible- "why do you think the druids ate it? It's hallucinogenic."
A bit like the VAT regs.