HMRC has stepped up its campaign to expand the scope of 'confectionery' under VAT law - and the courts are backing them

"What began as isolated disputes over niche items is now reshaping how cakes, baked goods and sweet snacks are treated for tax purposes. The result is that products previously considered zero-rated are increasingly being reclassified as standard-rated confectionery, subject to 20% VAT. The change centres on a single phrase in VAT legislation, which defines confectionery as: "Chocolates, sweets and biscuits; drained, glace or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.""

"That logic has already been applied to cases ranging from mega marshmallows to M&S's viral Strawberry and Crème 'sandwich', raising industry-wide questions about how far the category could extend. HMRC has gone beyond case-by-case challenges and is now issuing 'One to Many' letters to producers, wholesalers and retailers. These urge businesses to file error correction notices for potential underpayments dating back four years."

Products that were often zero-rated are increasingly being treated as standard-rated confectionery and therefore subject to 20% VAT. The determining phrase in VAT law covers "any item of sweetened prepared food which is normally eaten with the fingers," and HMRC and courts are treating that clause as decisive. Rulings have affected items from mega marshmallows to a viral Strawberry and Crème sandwich. HMRC is sending 'One to Many' letters that urge error correction notices for potential underpayments going back four years. Businesses face retrospective liabilities and are advised to track case law, review past HMRC correspondence, audit product ranges and consider legal challenges.

Read at Business Matters