Under HMRC rules, most cold food, including sandwiches, is zero rated for VAT. Sweet treats are considered non-essential and face a 20% levy. M&S argues that their limited edition Red Diamond Strawberry & Creme Sandwich qualifies for zero VAT as it resembles, is filled, and is marketed like a sandwich. However, HMRC's classification considers sweetened items eaten with fingers as confectionery. This legal argument between M&S and HMRC is expected to be presented in court. M&S claims inspiration from Japanese fruit sandwiches for their new product.
Most food, including sandwiches, is zero rated for VAT, meaning that we as customers don't pay VAT, and the businesses who sell them get better margins by keeping the sales prices low.
But some food becomes taxable if it's classified as non essential, and this is things like confectionery and biscuits.
So M&S are arguing that because it is packed like a sandwich, filled like a sandwich and is marketed like a sandwich, it is a sandwich, and so it should be zero rated for VAT.
HMRC says something counts as confectionary when it is sweet and eaten with your fingers.
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