- VAT Classification Dispute: Marks & Spencer’s strawberry and cream sandwich is at the center of a potential legal battle with HM Revenue & Customs (HMRC) over its VAT classification, with M&S arguing it should be zero-rated as a sandwich, while HMRC contemplates treating it as standard-rated confectionery due to its dessert-like qualities.
- Context of Food VAT Cases: This case is part of a broader history of unusual VAT disputes in the UK, including notable cases like Jaffa Cakes and Greggs sausage rolls, where the classification impacts pricing, profit margins, and compliance costs. Outcomes depend on factors like product presentation, selling method, and packaging.
- Increasing HMRC Vigilance: HMRC is enhancing its compliance efforts using AI and analytics to monitor VAT treatment, which pressures businesses to invest in tax technology and legal reviews. This scrutiny can disproportionately affect smaller companies, potentially leading to significant financial strain from unexpected tax liabilities.
Source Innovate Tax
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