A health food brownie containing dates and brown rice bran has been deemed a cake – and so free from VAT charges – after a judge taste-tested the product alongside Mr Kipling’s French fancies and Tunnock’s teacakes.
Pulsin could reclaim up to £300,000 from HMRC after Judge Amanda Brown ruled in the Gloucestershire-based manufacturer’s favour, saying the company’s Raw Choc Brownies would “absolutely not look out of place” at “a cricket or sporting tea”.
Brown dismissed Pulsin’s claims that the brownies were “not sweet enough” to be considered confectionery, on which VAT is charged, but said this did not exclude them from being cakes.
Unlike sweets, cakes are considered to be a staple food and therefore zero-rated for VAT. Biscuits are also zero-rated unless they are a luxury item, which usually means they have chocolate on top.
Brown said the ingredients used in making the brownies, the manufacturing method, their taste and texture were all “consistent with those of a cake”.
She said: “With the rise in obesity the public look for cakes different in nature to those of the 1970s.
“Put alongside a slice of traditional Victoria sponge, a French fancy and a vanilla slice or chocolate eclair, the products may look out of place.
“However, put alongside a plate of brownies or, for instance, at a cricket or sporting tea, where it is more likely that bought and individually wrapped cakes will be served on a plate, the products would absolutely not stand out as unusual.”
The dispute began in 2016 when Pulsin said it had wrongly been paying VAT on the products for four years.
An HMRC spokesman said: “We are carefully considering the decision in this case.”
Brown’s ruling referred to the 1991 Jaffa Cakes case when McVitie’s successfully argued that the product was a cake and not a biscuit and so not liable for VAT.
A tribunal determined that certain characteristics of the Jaffa Cake were cake-like, including the ingredients and texture, but it was also the size and shape of a biscuit, packaged and sold alongside biscuits and presented to be eaten with the fingers and not, as might be expected of a cake, eaten with a fork. The product was nevertheless determined to be a cake.