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snack at the gym | accountingweb | DuelFuel Nutrition Ltd v HMRC: A Right Mix-Up
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Dual-pack cake product causes a tax stir

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The case of a sports nutrition product comprising a flapjack and another sweet treat is the latest in a long line of tribunals to ask: “When is a cake not a cake?”

13th Feb 2024
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Yet another decision of the first tier tribunal (FTT) has sought to answer the nebulous question: is it a cake? 

DuelFuel produced flapjacks, brownies and cakes (collectively referred to in the judgment as “the Products”), which were packaged together in pairs of one flapjack and either a brownie or a cake. The Products were intentionally designed for and aimed at people undertaking rigorous exercise – the flapjack provided carbs and energy before a workout, and the brownie or cake was high in protein to aid in recovery afterwards.

DuelFuel argued that the Products were “cakes” and therefore zero rated; or, alternatively, that they were not confectionery and so zero rated regardless.

The relevant principles and legislation will no doubt be familiar. In outline, food for human consumption is generally zero rated under group 1 of schedule 8 VATA 1994. This is subject to exception item 2: “confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.”

Note 5 provides further guidance on the meaning of confectionery and specifies that: “confectionery includes chocolates, sweets and biscuits; drained, glace or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.”

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Replies (20)

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By FactChecker
13th Feb 2024 17:53

Not surprised, based solely on the above, to hear that DuelFuel has ceased trading.

This has nothing to do with the VAT result nor their strange concept of a market niche, but everything to do with a total lack of empathy between their argument here and any presumed marketing. Specifically:
* relying on the FTT finding that there was a “slightly unpleasant mouth feel” ... and that the contents all fell short “of a standard to be served to guests as a treat with afternoon tea” ... is hardly a ringing endorsement of one's products unless you are solely targeting masochists?

Thanks (6)
Replying to FactChecker:
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By Roland195
13th Feb 2024 20:07

In products such as this, taste and other quantities - "mouth feel" are always of secondary importance to the macronutrient content but I can't really follow the FTT thinking of "it doesn't taste nice enough to be considered a cake. Would a Jaffa cake be acceptable to be served with Afternoon tea?

Another example of using legislation from half a century ago to deal with the products available today.

Thanks (4)
Replying to Roland195:
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By bobsto12
14th Feb 2024 09:58

The tribunals reasoning sounded bonkers and extremely dubious.

Thanks (3)
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By JustAnotherUser
14th Feb 2024 08:39

The FTT found that an ordinary person would consider a cake to be a “high-calorie food eaten as a treat” by people of all generations

WRONG on so many levels. very out of touch.

the FTT noted that DuelFuel’s cake and brownie were “cake-like” but heavier and denser than expected, and there was a “slightly unpleasant mouth feel”

how does mouth feel which is subjective play into this and... heavier than expected, what a laugh... go eat a treacle cake which is heavy and dense...

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.thegrocer.co.uk%2F...

that's a cake to me, and if you ran the question 1,000,000 times on family fortunes the survey would say 100% of times this was a cake... taste and weight are silly???

Thanks (1)
Replying to JustAnotherUser:
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By Roland195
14th Feb 2024 09:14

Do you consider that it is the members of the FTT that are out of touch or the legislation they are bound by?

It's interesting that they tend to invoke the opinion of the man on the Clapham Omnibus while coming across as having no idea what or how such a man eats.

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Replying to Roland195:
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By JustAnotherUser
14th Feb 2024 10:19

both...
A) when is a cake a cake should not be human interpretable when it comes to legislation
B) legislation causes a human interaction, which causes more objective issues

Look at the language ....

confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or "some product similar in taste and appearance"

... so this is quite vague but in the next sentence....

the flapjack must be a “traditional” one – that is, made of oats, butter and syrup

so we have a traditional definition of a flapjack and a vague definition of a cake.

And when definitions are not clear enough they use 'opinions' such as....
-cake-like
-heavier
-mouth feel

end result... DuelFuel had ceased trading due to the ongoing dispute

everyone loses.

Thanks (4)
By Nebs
14th Feb 2024 09:46

Just tax the lot, sweets, cakes, biscuits, confectionery, you name it, anything similar, at 20%. No more arguments. Government gets a bit extra in the coffers. Everyone is happy, apart from the fatties.

Thanks (6)
Replying to Nebs:
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By paul.benny
14th Feb 2024 10:15

Whilst I strongly support simplification, the problem is always about defining a clear line is between standard and zero-rated foods.

Bread and rolls are zero-rated. But what about iced buns or hot cross buns - bread dough, possibly enriched with sugar/butter/egg and with icing and/or dried fruit. The only real difference between these and cake is that one is yeasted and the other chemically leavened. If you make that the distinction, every commercial cake recipe will have some yeast added to gain zero-rating.

An alternative solution might be to make some protein enriched foods standard-rated - although that brings its own set of definitional problems and potential FTT cases.

Thanks (0)
Replying to Nebs:
Tornado
By Tornado
14th Feb 2024 13:32

Nebs wrote:

Just tax the lot, sweets, cakes, biscuits, confectionery, you name it, anything similar, at 20%. No more arguments. Government gets a bit extra in the coffers. Everyone is happy, apart from the fatties.

On the contrary, just about everything we eat or drink must be a food so zero rate everything in this 'eat and drink' category.

Thanks (0)
Replying to Nebs:
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By Roland195
14th Feb 2024 16:06

Nebs wrote:

Just tax the lot, sweets, cakes, biscuits, confectionery, you name it, anything similar, at 20%. No more arguments. Government gets a bit extra in the coffers. Everyone is happy, apart from the fatties.

Why stop there though? Why not standard rate all high calorie food (or processed, high fat/sodium etc) which would have the added advantage of uncomplicating the selling of "freshly baked" sausage rolls?

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By farrcorfe
14th Feb 2024 10:04

Too many lawyers and accountants getting fat fees out of this sort of thing (sorry about the intentional pun). I heartily agree with the suggestion of 'tax the lot' although they can't use the sugar content as a basis owing to the amount (of pretty harmful in the long term) artificial sweeteners. The simpler the tax the more cost-effective it seems to be

Thanks (2)
Replying to farrcorfe:
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By Halex
14th Feb 2024 10:29

Simplification of VAT ? - Yes please. How about going through the whole VATA.

Thanks (3)
Replying to farrcorfe:
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By MaxSchofield
15th Feb 2024 11:01

Although your comment is aimed more generally, just FYI in this case the Appellant’s reps acted pro bono.

Thanks (1)
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By Springfield
14th Feb 2024 10:54

In Bleak House, Charles Dickens introduces the perpetual legal case of Jarndyce and Jarndyce. But even he would have dismissed the 21st century battle of Cake v Biscuit as being beyond parody.

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By listerramjet
14th Feb 2024 11:40

An example of overly complex rules causing a business to go bust. Or tail wagging the dog. AGAIN.

Thanks (2)
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By paul.benny
14th Feb 2024 20:52

Although the report above says the company has ceased trading, their website shows they are still active and there is nothing at Companies House to say otherwise.

From a quick scan of the data at Companies House, the business has never been profitable and is reliant on the continuing support of the sole director and an unidentified investor. There isn't enough information filed to determine the significance of this judgement.

I have a degree of sympathy with the company as it appears from the case report that they did take proper advice, and it does appear that the FTT did struggle a little with some the definitions.

Thanks (2)
Replying to paul.benny:
Picture of David Tipping
By David Tipping
15th Feb 2024 09:41

Hi, thank you for your comment! To elaborate on the above, the FTT recorded at paragraph 39 that:

"Following the adverse decision letter from HMRC on 14 January 2022... Mr Davies took the decision that the Appellant should cease trading pending the outcome of an appeal to this Tribunal as the price point for the Products was such that it was not possible to sell at a price increased by 20% VAT. Further, the distraction of dealing with HMRC meant Mr Davies was unable to sell the Products that had been manufactured before the expiry of their sell by date."

I hope that clarifies what was meant in the summary above.

Thanks (1)
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By RogerMT
15th Feb 2024 11:16

The last paragraph proves what an arcane, pedantic waste of time and effort this case was! People lost their livelihoods because of this nonsense. This whole article reads like an accountant's take on Dickens. I particularly laughed at "... the FTT noted that DuelFuel’s cake and brownie were “cake-like” but heavier and denser than expected, and there was a “slightly unpleasant mouth feel”. :)

Thanks (1)
Replying to RogerMT:
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By Roland195
15th Feb 2024 11:38

Somewhere out there, a small family bakery will be bankrupted because they sell gingerbreadmen...(people) with chocolate buttons or they foolishly believe that Millionaires shortbread sans caramel IE chocolate covered shortbread would also be Zero Rated.

It's all abstract fun & games for the FTT & the advisors with hefty fees navigating this drivel paid by the Multinationals but a case like this leaves a bad taste in the mouth...

Thanks (1)
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By bendybod
19th Feb 2024 14:21

Here's an idea. Zero rate food.

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