If you’ve been on TikTok recently, you’ve probably seen the buzz around Marks & Spencer’s limited-edition strawberries and cream sandwich. Launched just in time for Wimbledon, it quickly became M&S’s best-selling sandwich for two days straight – but according to Natalie Bate, this viral snack could end up causing big problems when it comes to VAT.
“It could be that the M&S strawberry sandwich becomes the new Jaffa Cake VAT case,” she said.
“Jaffa Cakes were originally zero rated as cakes for VAT purposes. But after a review from Customs and Excise, they were ruled to be chocolate covered biscuits which meant they carried a VAT rate of 20%.
“McVities took the case to a tribunal, arguing that cake was in the name, that the ingredients and mixture were closer to a sponge mix than a biscuit dough, that it was soft like a cake rather than crisp like a biscuit, and it went hard when stale and not soft like a stale biscuit.”
Natalie said HM Revenue and Customs argued that the marketing and supermarket placement was in line with the product being a biscuit, that it was the size of a biscuit, and that people ate them with their fingers rather than with a fork like a cake.
“Taking all these points into consideration, it was decided that the Jaffa Cake had enough characteristics to be accepted as a cake and so it reverted back to being zero rated for VAT.
“But fast forward to today, and M&S could find themselves in a similar position. The sandwich rapidly sold out after it went viral on social media, but HMRC are currently reviewing whether it is a sandwich or a cake.
“Sandwiches are zero rated, but due to the sweetened bread and dessert-like nature, the product could be ruled as confectionery which carries a 20% standard VAT rate.
“At a price of £2.80 per sandwich, M&S could potentially owe HMRC 46p per sale in unbudgeted VAT, so considering the phenomenal demand for the product that could lead to a hefty bill.”
Strawberry sandwiches are available at some Japanese bakeries in the UK, but the M&S sandwich is believed to be the first time the product has been widely available on supermarket shelves.