Scotland-based cake makers Lees Foods and Thomas Tunnock have won a legal battle over the tax status of their Snowballs snacks.
After UK tax authorities ruled the snacks were not cakes and therefore subject to VAT, Lees and Thomas Tunnock faced a combined tax bill of GBP2.8m.
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Both companies appealed to a tribunal in Edinburgh that the products were cakes and exempt from the tax.
On Friday (27 June), the tribunal, which had combined the two cases, ruled in favour of the companies, arguing the Snowballs were technically cakes.
“A snowball looks like a cake. It is not out of place on a plate full of cakes. A snowball has the mouth feel of a cake,” Judge Anne Scott said in her ruling. “We are wholly agreed that a snowball is a confection to be savored but not whilst walking around or, for example, in the street. Although by no means everyone considers a snowball to be a cake we find that these facts, in particular, mean that a snowball has sufficient characteristics to be characterised as a cake.”
Lees declined to comment on the ruling. Officials for Thomas Tunnock could not be reached for immediate comment.
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