United Biscuits (UK) Ltd (No. 2)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 August 1991 |
| Date | 21 August 1991 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
Serious misdeclaration penalty - Output tax underdeclared - Appellants in partnership as contract cleaners - A contract was obtained with the Warrington and Runcorn Development Corporation and for the first three months the partnership sent the Corporation an invoice setting out the price for the work done together with VAT - The Corporation then changed the system of payment, offering annual contracts to be paid in 12 equal monthly instalments - The partnership, after receiving a monthly instalment which did not include the amount of VAT due, would be required to issue an invoice for the VAT due on the instalment - This method imposed by the Corporation had been adopted and not queried until a Customs officer visited the appellant and helped fill in an application form for the cash accounting scheme - As the Corporation was a government funded body it never occurred to the appellant to question its method of accounting for VAT - An officer on a control visit found that certain of the instalments paid by the Corporation had not been included in the return for the periods in which they had been made - An assessment was therefore raised - The tribunal considered that, on balance, the appellant should not be blamed for thinking that the way asked by a responsible body associated with the government to deal with the VAT charged them was legitimate and correct - Appeal allowed -Finance Act 1985 section 14 subsec-or-para (6)Finance Act 1985, sec. 14(6)(a).
VAT Tribunal
The following cases were referred to in the decision:
Marks & Spencer plcVAT (LON/88/1316) No. 4510; (1990) 5 BVC 537
Panini Publishing Ltd and Mirror Group Newspapers LtdVAT(LON/88/166 and 887) No. 3876; (1989) 4 BVC 704
Zero-rating - Food - Whether "Jaffa cakes" cakes or biscuits - Value Added Tax Act 1983 schedule 5 group 1 Value Added Tax Act 1983, Sch. 5, Grp. 1, excepted item 2.
The issue was whether "Jaffa Cakes", which had previously been zero-rated as food, were really biscuits covered with chocolate and as such liable to the standard rate of value added tax.
Under the trading name of McVities the appellant manufactured cakes and biscuits, one of their products being Jaffa Cakes. The appellant contended that Jaffa Cakes were food of a kind used for human consumption and chargeable to tax at the zero rate under Value Added Tax Act 1983 schedule 5 group 1Sch. 5, Grp. 1 of the Value Added Tax Act 1983.
The commissioners contended that Jaffa Cakes were not "cakes" within the exception to excepted Value Added Tax Act 1983 schedule 5 group 1item 2 under Sch. 5, Grp. 1 so as to attract zero-rating. Jaffa Cakes were either biscuits covered with chocolate or chocolate substitute and as such fell within excepted Value Added Tax Act 1983 schedule 5 group 1item 2 to the said group and were chargeable to tax at the standard rate, or were "confectionery", also within excepted Value Added Tax Act 1983 schedule 5 group 1 item 2 and were similarly chargeable at the standard rate. The commissioners' solicitor further contended that among the notes to Value Added Tax Act 1983 schedule 5 group 1Grp. 1 in Note (5) were the words "and for the purposes of Value Added Tax Act 1983 schedule 5 group 1item 2 of the excepted items "confectionery" includes … any item of sweetened prepared food which is normally eaten with the fingers". It was also contended that the tribunal would derive no help from the evidence of the opinion of witnesses and that none of the oral evidence tendered on behalf of the appellant was relevant.
Held, allowing the company's appeal:
1. The commissioners' contention that the opinion of witnesses was irrelevant was rejected. Assistance might be derived from statistical evidence as to the views of ordinary shoppers. No weight had been given to the results of market research or expert evidence.
2. The ingredients of the sponge part of the Jaffa Cake were virtually the same as the ingredients of a traditional sponge cake. The sponge cake part of a Jaffa Cake was in itself a cake.
3. A cake was mainly soft...
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