When is a cake not a cake?

We have a VAT case which considers the difference between a cake (which is zero-rated) and an item of confectionery (which is subject to VAT at 20%). Following the infamous Jaffa Cake case, we shine a light on one of the more obscure and quirky parts of the UK VAT system.

This time, it’s the flapjack under scrutiny and it has been recategorised. While a flapjack is perhaps not something people would generally describe as cake, since 1973, HMRC has accepted that flapjacks are zero-rated cakes not items of confectionery.

This dates back to the inception of VAT in the 1970s, when HMRC deemed flapjacks to be cakes that home bakers produced and therefore subject to VAT 0%. Back then, cereal and energy bars and similar products which contain simpler ingredients (but are subject to VAT as confectionery), were largely unavailable.

However, in recent years, it has become increasingly difficult to differentiate a flapjack from other products like cereal bars. HMRC has attempted to define the term ‘flapjack’ narrowly by stating, for example, that it should only contain oats rather than other cereals.

Unlike the Jaffa Cake case, the court concluded that flapjacks are fundamentally not cakes after all and therefore subject to VAT at 20%.

So, if you produce a biscuit-sized cake, add an orange-flavoured centre, cover it in chocolate and package it like biscuits, it’s still a cake. But if you produce a flapjack, it now appears that it can never be a cake, regardless of how it’s packaged or promoted.