Under UK law, no VAT is charged on biscuits and cakes - they are "zero rated".
Chocolate covered biscuits, however, are classed as "luxury items" and are
subject to VAT. McVitie's classed its Jaffa Cakes as cakes, but in 1991 this
was challenged by Her Majesty's Customs and Excise in court.
The question which had to be answered was what criteria should be used to
class something as a cake or a biscuit. McVitie's defended the classification
of Jaffa Cakes as a cake by arguing that cakes go hard when stale, whereas
biscuits go soft. It was demonstrated that Jaffa Cakes become hard when stale
and McVitie's won the case.
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