One of the great things about recently getting married was not having to write about the Marks and Spencer Strawberry & Creme thing.
But successfully hitched and safely ensconced back at FT Alphaville Towers, we couldn’t get it out of our head.
We write “thing”, because the item — widely called a sandwich or “sando”, though not by its own box — became the focus of a burst of brief but intense UK-tax-related coverage in late June and early July, after being launched by moderately upmarket British grocer M&S.
The ‘Red Diamond™ Strawberry & Creme on soft sweetened bread’ (henceforth RDSC)’s general hype as a culinary arrival had a wonky sub-category. Punters, aggregators, churnalists and tax advisers all were asking whether if it were being sold as a sandwich — and therefore zero-rated for value-added tax — HM Revenue & Customs (the UK’s tax authority) might choose to challenge that.
Some went further, suggesting a legal challenge was already under way — something for which there is no apparent evidence. See for example this TikTok by user accountant_she, which opens with the bold assertion that “HMRC are heading to court with Marks and Spencer over this viral sandwich”: 111k likes, presumably millions of views, questionable factual content. Who knows — maybe the creator has great HMRC sources, maybe drama sells.
Anyway, here’s how the RDSC looks:
© Marks and Spencer
And, yes: it’s quite clearly a cold sandwich, a product that HMRC specifies qualifies for zero-rating under UK tax law unless supplied in the course of catering (which is not the case here). We’d be surprised if HMRC decided to challenge that, and even more so if it were successful.
Still, there is a tenuous reason for confusion, and Daniel Rice at cake specialists Grant Thornton has the best write-up we’ve seen about the issues at stake, one which we will pick up on later in this piece.
Alphaville now has a surprisingly rich catalogue of articles about UK VAT law, concerning poppadoms, collagen, flapjacks, action figures, bougie honey and probably some other stuff we’ve forgotten. Where does the “sando” fit into all this?
Well, it’s definitely food — a category that is usually zero-rated for VAT. But there are exceptions, so it’s worth figuring out exactly what kind of food it could be. We reckon there are four conceivable options:
(For more information on problematic cakes, see our previous flapjack coverage.)
But getting straight into the weeds about this means skipping a simple and fundamental question:
Is M&S, or is it not, charging VAT on this cursèd item?
One of the weirdest parts of the burst of coverage about the RDSC is that nobody, seemingly, ever got an answer about what M&S was actually doing.
As far as we can see, the VAT questions initially bubbled up on LinkedIn, and were first picked up by City AM (the author’s former employer). City AM’s piece included comments from FTAV tax coverage regular Max Schofield of Devereux Chambers (not the author’s former employer), but did not include a response from M&S (the author’s former employer). Coverage rapidly spread, but the question either wasn’t being asked, or wasn’t being answered.
One write-up, from Milsted Langdon’s Julian Borley, said:
It is understood that Marks and Spencer are treating the product as being zero rated for VAT purposes as they would with any other sandwich that they sell.
We asked Borley where this understanding came from, and he told us:
In writing my article I had looked through various others and I saw the comment on another source. Unfortunately, I cannot find that source now.
It is likely that most of the sandwiches that M&S sell will be zero rated. However, I don’t think it can be said for certain that this product is treated as zero rated.
It’s usually on a seller to judge whether VAT should apply to their wares, with HMRC standing by to offer (sometimes unhelpful) advice, and step in if they think things are being done incorrectly.
In that context, M&S’s default VAT treatment is fundamental to the RDSC pseudo-debate:
— if there is no VAT, they’re probably categorising it as a cold sandwich, and there could be a controversy.
— if there is VAT, they’re probably categorising it as confectionery, and it seems unlikely HMRC would challenge them on that (why give up tax revenue?).
Figuring out which it is (without asking the company) might have been easy. Traditionally, one way of telling whether you’ve been charged VAT on a product is to look at the receipt. If there’s an asterisk next to an item’s price, you’ve paid VAT. M&S, however, seemingly doesn’t do this.
Still, we wanted to check — and FTAV rarely gets to do shoe-leather tax reporting — so on Wednesday afternoon we wandered down to the nearest M&S and bought FOR PRIMARILY* REPORTING PURPOSES an RDSC (VAT rating unknown), some ready salted crisps (definitely standard-rated) and a banana (definitely zero-rated). Don’t let anyone tell you journalism is easy.
One immediate discovery was that if the RDSC had ever been a sellout viral sensation in the Square Mile, that time may have passed** — the One New Change M&S food-to-go fridge had dozens of 75p sandos about to pass their best-before date:
© FTAV
A very-slightly later, more important discovery was that our receipt had no asterisks.
Having failed to do journalism the old-fashioned way, we got in touch with M&S.
…who refused to tell us, or disclose whether any contact with HMRC had taken place — despite our pleading that here is a strong public interest in this case.
A source close to the company said it does not reveal this kind of detail about its products, but indicated it is seen internally as a sandwich.
We could get caught up on wondering why M&S is so unwilling to share this type of information, but instead let’s just accept this issue may be shrouded in mystery for some time.
What do we do with this non-answer?
Assuming the answer indeed is a sandwich, the obvious answer is this: nothing. We do nothing with it. It’s trivial. Unless HMRC decides it’s a good use of taxpayers’ money to challenge M&S over this, this entire controversy exists purely in the realm of the hypothetical.
Despite that, some places have already started using the RDSC as a stick to beat VAT rules with — take for example the Institute of Chartered Accountants in England and Wales, whose technical manager Ed Saltmarsh says this demonstrates how VAT is “weighed-down by complexity”. We agree with the broad point, but this case doesn’t (yet) illustrate it.
Not least because IT’S CLEARLY A COLD SANDWICH.
OK but is it though?
😞
Fine, let’s do this.
As mentioned above, HMRC would probably only get into a scrap with M&S over this if they think the RDSC is confectionery. If it is being categorised as a cold sandwich, it would make little sense for HMRC to bother suggesting it should instead be seen as an unspecified food or conventional cake — those are also are zero-rated, so there would be no benefit to the taxman from it.
HMRC might try to frame the RDSC as the kind of problematic cake we alluded to above, in an effort to bump it into confectionery.
If that were to happen, the role of the humble Victoria Sandwich would surely become crucial. It’s practically the platonic ideal of a British cake (yes, despite being called a sandwich in this sliced form), it’s more cake-like than the sando, but it’s also similar in many key ways — consisting of something creamy and something strawberry-y inside two bits of sweetened, baked carbohydrate:
Surely no judge would deem that the RDSC is more confectionery-like than the Victoria Sandwich — or, even more radical, open the door to a future ruling that a Victoria sponge is not cake. Surely.***
Why a judge might deem that the RDSC is more confectionery-like than the Victoria Sponge
Were this case ever to make it to a Tax Tribunal, there would probably be two significant points:
1) How the judge chooses to interpret the recurrent advice that questions of this type, as per Lord Justice Jacob’s guidance in Revenue & Customs v Procter & Gamble UK, call for a “short practical answer”.
2) If the answer to point 1 somehow isn’t “it’s obviously a cold bloody sandwich”, the outcome of a multifactorial assessment of the product’s nature.
That assessment would involve going through a bunch of the sando’s attributes, and assessing whether they are sandwichian.
As mentioned above, Grant Thornton’s Daniel Rice has done what we think is a pretty good job at estimating how her assessment would go down, which we’ve quoted below and interspersed with our thoughts:
Taste: It tastes of strawberries and cream and bread, unsurprisingly. This makes it a sandwich that I’d tell my kids off for making, but a sandwich nonetheless.
Given a jam sandwich is a sandwich, it’s hard to imagine a sweet/fruity taste being any kind of delimiter for a sandwich.
Texture: Ditto, anything sandwiched by two pieces of bread is inherently sandwichy. Nobody can tell me otherwise.
An argument could be made about the bread being sweet(ened), but there’s no shortage of savoury sandwich fillings to be bought in brioche-style buns, so this seems unlikely to preclude sandwichicity.
Admittedly, brioche could be complicated. In DuelFuel Nutrition Limited vs HM Revenue & Customs (covered here), Judge Hyde wrote:
Applying the test of what an ordinary person would consider to be a cake we start with a conventional or archetypal cake to be something that is made from a batter containing flour and eggs and is sweet due to the presence of ingredients such as sugar, golden syrup or honey and to contain fat, normally in the form of butter, margarine or an oil. A cake is normally baked to produce an aerated sponge.
But if things get to this level, it’s worth noting that the RDSC bread isn’t brioche, it’s “brioche-style” — and its ingredients list does not include egg.
Because of the weird way this works, this ends up as both an argument for it being a sandwich if you want it to be a sandwich, and for it not being cake if that somehow becomes the question.
Anyway, back to Rice…
Ingredients: Bread is the key one here. Bread with a filling = sandwich.
This is probably as good a time as any to link to The Cube Rule.
Manufacturing process: This is a guess at this stage, but presumably manufactured very much like any other sandwich.
This is probably as good a time as any to link to that Guardian Long Read.
Marketing: A Japanese sando; a Wimbledon special, unique novel food product, sweet treat. I don’t think the marketing knows how to categorise the product any better than the VAT legislation does.
Interestingly the marketing team seem more confident than the packaging designers — a social media post launching the RDSC does claim it as a sandwich (as well as a “sando” and a “sarnie”):
On the “sando” element — there are some small distinctions between products and the Japanese version of products in VAT law (traditional Japanese sweetmeats are zero-rated (as cakes), while sweetmeats are confectionery). We doubt any judge would see a Japanese remix of a sandwich as being meaningfully different from, you know, a sandwich.
Packaging: Ditto, I see very few clues on VAT treatment here, save for the front of the packet explicitly does NOT call the product a cake, a sandwich or an item of confectionery.
An important bit of context here is that M&S doesn’t write “sandwich” on the front of any of its sandwiches, probably because they’re self-evidentially sandwiches:
Healthiness: Well it’s got fruit in it, so that’s something.
Alphaville is not a nutrition blog! Nutritional needs vary from person to person, and all food should be considered in the context of your wider diet, health and lifestyle!
Here are the per-pack ingredients/nutritional info for an RDSC compared with the M&S All-Day Breakfast sandwich:
We hope a judge wouldn’t attempt a take on which one of these is healthier! And we don’t think healthiness is an inherent characteristic of a sandwich!
Consumer perception: This is hugely unreliable for a novel new product; nobody knows what they’re eating yet, although consensus online appears to be that whatever it is consumers like it.
Consumers probably recognise when they’re eating a sandwich because it’s a sandwich and it does things a sandwich oughta.
Placement in store: It’s always sold out obviously, but it’s sold out just next to all the other sandwiches.
Oddly enough the RDSC is not listed in the sandwich section of M&S’s website, but it is in the sandwich section of their shelves. Ocado, the grocery delivery company that is partnered with M&S, calls it a sandwich on its ‘Zoom by Ocado’ app (where it is sold out).
Overall: it’s food, it’s probably a sandwich, just not as we know it.
Yes, but also a sandwich very much as we know it, because it’s a sandwich.
One section that Rice has overlooked is circumstances of consumption, which readers may remember was a controversial point in the flapjack debate. As Judge Hyde wrote in the DuelFuel case:
An ordinary person would consider a typical cake to be a high calorie food eaten as a treat whether sitting down with a cup of tea, after a meal or during a children’s birthday party or standing up at a social function, perhaps a party or celebrating a birthday at work. An ordinary person would also expect a cake to be something eaten by all generations.
As we wrote then, this is a bizarre framework through which to judge whether something is a cake. But it need not matter here, as long as the tribunal doesn’t somehow decide it isn’t a sandwich, and then proceed to go down the “then what is it?” route.
And if they were put in the most obvious situation of trying to figure out if it’s a sandwich… well it seems pretty likely that it’s intended to be consumed under conventional sandwiching conditions. Right?
One takeaway from this is that the product is clearly and simply a sandwich. Another is that, if HMRC vs RDSC did ever end up in court, it will end up being as complicated as the tribunal decides to make it.
*Status of items purchased at time of writing:
— Banana: eaten by FTAV.
— Ready-salted crisps: eaten by FT Climate desk. “I really appreciated them but they weren’t very nice” — source.
— RDSC: chilling in Bracken House floor 2 south-side fridge, T+1 best before date.
**A later visit on Wednesday to the M&S Simply Food on Tottenham Court Road uncovered just three remaining RDSCs, all reduced to £1.25. There’s another article in that somewhere.
***MainFT’s Josh Spero has sent us this picture of an authentic Japanese Victoria sponge sando (the cake is the filling) which would intuitively be zero-rated but could also probably break the UK tax system:
© Josh Spero
