Too Sweet for HMRC? Why Your Office Favourite Treat Might Now Come with a Tax Bite!

Every office has that one sweet treat that disappears the moment it hits the staff room — whether it's doughnuts on a Friday or that mysterious packet of brownies that "nobody brought in." 🍩 At The Tax Faculty, our unofficial office favourite is anything involving caramel… but according to HMRC, those indulgent moments might now come at a higher tax cost.

HMRC has ramped up its campaign to widen the definition of ‘confectionery’ for VAT purposes, and recent court rulings suggest they’re winning. What once started as a handful of disputes over niche snack products has now turned into a full-scale VAT reclassification push — and the implications for the food industry are significant.

Traditionally, the VAT rules have been quirky at best:

Cakes and baked goods – Zero-rated for VAT.

Confectionery (sweet snacks, bars, sweets) – Standard 20% VAT.

Seems simple — until it's not.

Products that look like cake, taste like cake, and are eaten like cake have been successfully challenged by HMRC and reclassified as confectionery, making them subject to 20% VAT.

Recent court cases have shown:

🧁 If it’s sweet, portable, individually wrapped or designed for 'on-the-go snacking', HMRC may class it as confectionery — even if it feels like a cake.

From Cakes to Confectionery – The VAT Shift

HMRC’s New Confectionery rules

The shift from 0% to 20% VAT isn’t just a minor technicality — it can have a significant impact on pricing, profit margins, and overall competitiveness for food businesses and retailers.

A reclassification of products as confectionery can lead to immediate cost increases that eat into profitability, while forcing difficult decisions on whether to absorb the additional VAT or pass it on to customers. Even seemingly small details, like packaging and label wording, could draw HMRC scrutiny, and there’s always the risk of retrospective VAT claims, where HMRC may demand unpaid tax along with penalties.

Businesses need to stay vigilant to navigate these changes effectively.

Why this Matters for Small Businesses

Just because your office thinks it’s a cake… doesn’t mean HMRC agrees. As sweet treats continue to blur the lines between snack and bakery item, tax classification is becoming just as important as recipe development.

If you're unsure whether your product is a cake or a tax trap, our VAT specialists at The Tax Faculty can review your product portfolio and help you protect your margins before HMRC takes a bite 🍰

👉 Need VAT clarity on your product range?
Book a quick call with our VAT team today. We promise we won’t tax your custard creams.

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Final Thoughts

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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