In general, food not supplied in the course of catering is zero-rated for VAT purposes. However, an exception is made for “confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance”, which is standard-rated.  

This begs the question, is M&S’s Strawberries & Creme Sandwich confectionery other than a cake? If it is, VAT must be charged at 20%. If not, VAT should be charged at 0% as for other, more traditional sandwiches. Clearly, this could have a significant impact on the price charged and/or M&S’s profit margin. 

Let’s begin by considering what is meant by “confectionery” and “cake”. The VAT legislation states that the term “confectionery” includes items such as chocolates, sweets and biscuits as well as “any item of sweetened prepared food which is normally eaten with the fingers”.  

HMRC says that cakes are “often made from a thin batter containing flour and eggs, and aerated in the process of cooking”, and include “sponge cakes, fruit cakes, pastries, éclairs, meringues and jaffa cakes”. 

Now let’s apply this new-found knowledge to the product, as described by M&S in its social media posts: “Filled with our sweet and juicy British Red Diamond Strawberries with a thick layer of whipped cream cheese on a sweetened bread, it may look like a dessert but you’ll find this exclusive treat at home with the rest of our sandwiches!” 

Any clearer? Probably not, and it may be that this becomes another in a long line of food-related VAT issues that are decided by the courts. Many people will be familiar with the Jaffa Cakes saga and more recently, the sticky issue of whether Mega Marshmallows are confectionery has kept the headline writers busy.  

Ed Saltmarsh, Technical Manager – VAT, ICAEW, said: "M&S’s sando highlights some of the key problems with VAT and helps explain why we launched the campaign How to fix VAT. The VAT system raises significant revenue for the UK but is weighed-down by complexity and has not kept pace with developments. Other countries, including Singapore, Australia and New Zealand, have shown the way. Perhaps the government should follow M&S’s lead by taking inspiration from others and rethinking its approach to a vital revenue stream.” 

Read more about ICAEW’s How to fix VAT campaign and listen to Ed talk about the Mega Marshmallows in this recent episode of the Tax Track podcast. 

Further information 

• Food products (VAT Notice 701/14) - GOV.UK