On 25 June 2014, the First-Tier Tribunal (FTT)
Tax Chamber in Scotland ruled that the chocolate
covered marshmallow topped with desiccated coconut ('the Snowball') constituted
a cake for the purposes of zero-rated
VAT. While
conceding that there was no objective test to determine whether an item of
confectionary was a cake, the FTT found that the Snowball ‘had sufficient characteristics to be
characterised as a cake’.
The case arose from two independent
appeals by two Scottish companies, Lees of Scotland Limited (Lees) and Thomas Tunnock Limited (Tunnock’s), both of
whom manufactured their own brand of
Snowball. Both companies contended that the Snowball was a cake and thus should be zero-rated for VAT purposes. Her
Majesty’s Revenue and Customs (HMRC) claimed that the product was not a cake
and liable for standard-rated VAT as was held in the case of Snowball Production Limited v. The Commissioners of Customs and Excise (‘Swedish
Snowball’).
The only issue for the FTT was to determine whether the Snowball was a cake. In finding in favour of the appellants, the FTT
made a number of findings in fact in relation to the companies’ respective
Snowballs, including packaging, the location of the products in the supermarket, the general public perception,
the manner in which each the Snowball was consumed and developments in food science.