Tax Talk: Jaffa Cakes – Cake or Biscuit? Tax Debate

At Black & White Accounting, we love a good tax debate, and few are as famous (or delicious) as the Jaffa Cake case. This isn’t just about what you call your teatime treat—it’s a prime example of how tax law can have surprising financial consequences. So, let’s break it down: why did it matter, what was the outcome, and why do you need an expert like us in your corner?

The Issue: Why Does It Matter?

For tax purposes, the difference between a cake and a biscuit isn’t just a matter of taste—it’s a matter of VAT (Value Added Tax). Under UK law:

• Cakes are zero-rated for VAT—meaning no extra tax.
• Biscuits, on the other hand, are standard-rated if they are chocolate-covered, meaning they attract 20% VAT.

McVitie’s, the makers of Jaffa Cakes, faced a battle with HMRC over whether their iconic treat should be classified as a biscuit (and therefore taxed) or a cake (and remain tax-free). With millions of pounds at stake, it wasn’t just a case of a name—it was a full-blown tax tribunal.

The Outcome: The £2M Verdict

The tribunal ultimately ruled in McVitie’s favour: Jaffa Cakes are cakes, not biscuits. The decision rested on several key factors:

• Jaffa Cakes have the same ingredients as a sponge cake.
• They have a soft texture, rather than the snap of a biscuit.
• When they go stale, they go hard, like a cake—biscuits, in contrast, tend to go soft.

This ruling saved McVitie’s an estimated £2 million in VAT and remains one of the most famous tax cases in UK history.

Why Is This Interesting?

This case highlights how tax law is full of complexities, often hinging on minute details that can have a huge financial impact. If something as small as a Jaffa Cake can spark a tax battle, imagine what’s at stake for your business!

Why You Need an Accountant Like Us

At Black & White Accounting, we know that tax isn’t just black and white (despite our name!). The Jaffa Cake case proves that interpretation matters, and having the right experts in your corner can save you significant money. We help you:

Navigate complex tax laws—so you don’t get caught out.
Maximise tax efficiencies—so you pay the right amount, not a penny more.
Stay compliant—so HMRC doesn’t come knocking.

Whether it’s VAT, corporation tax, or personal tax planning, we help turn grey areas into clear solutions. Want to make sure you’re not leaving money on the table? Get in touch today.