Recently, McVitie’s Penguin and Club bars officially lost their chocolate status and were reclassified as “chocolate flavour.” The change was due to the reduced amount of cocoa in their ingredients. Rising coca prices meant owner Pladis had to find cheaper alternatives.
It’s funny until you realise reclassification can be part of something much bigger.
Over the past year, HMRC has quietly been widening the definition of “confectionery”. What started as a few quirky food disputes has turned into a full-blown shake-up that could hit margins, pricing and profitability across the food industry.
So what’s changed?
In VAT law, confectionery includes: “Chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.”
The last section, “normally eaten with the fingers”, is the overriding rule, according to HMRC.
It can be baked, layered, filled or shaped like a sandwich … if it’s sweet and you eat it with your hands, it’s probably confectionery, and HMRC wants its 20%.
The signs were there
Remember when M&S’s strawberry and cream “sandwich” caught the headlines? Its identity crisis fuelled a huge internet debate … was it a cake, a scone, or a sandwich? HMRC simply and quietly filed it under taxable confectionery.
Then came the “mega marshmallow” case, which hinged on one surreal question: are people toasting them on sticks (potentially zero-rated) or just eating them straight out of the bag (definitely 20%)?
HMRC is stepping up the pressure, issuing “One to Many” letters to food producers, wholesalers and retailers.
For businesses with complex product lines, it’s a serious administrative and financial challenge.
Are you in food production, retail or wholesale?
Now’s the time to act. This means:
- revisiting old assumptions,
- preparing for potential backdated liabilities, and
- rethinking product pricing and classification strategies going forward.
When HMRC is taking a bite from our confectionery, it’s time to take a hard look at your product file.
If in doubt, talk to the tax experts at re:accounts Chartered Accountants in Stevenage. Minimising tax payment for our clients is our superpower. We’d love to save you some money!
