Is it a cake?

The two taxpayers were separate companies that made snowballs: coconut-covered marshmallows similar to teacakes but not the same having no biscuit base.

The businesses said the items were zero-rated cakes and claimed repayment of VAT amounting to £2.8m following voluntary disclosures on the basis the goods had previously been subject to standard-rate VAT in light of an HMRC ruling in reaction to the VAT tribunal decision in Swedish Snowball Production Ltd (2311) in 1995.

The Revenue refused the claim saying the products were confectionery and should be standard rated. The taxpayers appealed.

The First-tier Tribunal was presented with a plate of cakes – including a Jaffa cake Mr Kipling Bakewell tart meringue a teacake and a snowball – and found that “the plate looked like a plate of cakes”.

The snowball did not have all the characteristics of a cake – it contained no...