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One of the great things about recently getting married was not having to write about the Marks and Spencer Strawberry & Creme thing.<\/p>\n
But successfully hitched and safely ensconced back at FT Alphaville Towers, we couldn\u2019t get it out of our head.<\/p>\n
We write \u201cthing\u201d, because the item \u2014 widely called a sandwich or \u201csando\u201d, though not by its own box \u2014 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.<\/p>\n
The \u2018Red Diamond\u2122 Strawberry & Creme on soft sweetened bread\u2019 (henceforth RDSC)\u2019s 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<\/em> as a sandwich \u2014 and therefore zero-rated for value-added tax \u2014 HM Revenue & Customs (the UK\u2019s tax authority) might choose to challenge that.<\/p>\n Some went further, suggesting a legal challenge was already under way \u2014 something for which there is no apparent evidence. See for example this TikTok by user accountant_she, which opens with the bold assertion that \u201cHMRC are heading to court with Marks and Spencer over this viral sandwich\u201d: 111k likes, presumably millions of views, questionable factual content. Who knows \u2014 maybe the creator has great HMRC sources, maybe drama sells.<\/p>\n Anyway, here\u2019s how the RDSC looks:<\/p>\n And, yes: it\u2019s 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\u2019d be surprised if HMRC decided to challenge that, and even more so if it were successful.<\/p>\n Still, there is a tenuous reason for confusion, and Daniel Rice at cake specialists Grant Thornton has the best write-up we\u2019ve seen about the issues at stake, one which we will pick up on later in this piece.<\/p>\n 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\u2019ve forgotten. Where does the \u201csando\u201d fit into all this? <\/p>\n Well, it\u2019s definitely food \u2014 a category that is usually zero-rated for VAT. But there are exceptions, so it\u2019s worth figuring out exactly what kind of food it could be. We reckon there are four conceivable options:<\/p>\n (For more information on problematic cakes, see our previous flapjack coverage.)<\/p>\n But getting straight into the weeds about this means skipping a simple and fundamental question:<\/p>\n 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<\/em> doing.<\/p>\n As far as we can see, the VAT questions initially bubbled up on LinkedIn, and were first picked up by City AM (the author\u2019s former employer). City AM\u2019s piece included comments from FTAV tax coverage regular Max Schofield of Devereux Chambers (not the author\u2019s former employer), but did not include a response from M&S (the author\u2019s former employer). Coverage rapidly spread, but the question either wasn\u2019t being asked, or wasn\u2019t being answered.<\/p>\n One write-up, from Milsted Langdon\u2019s Julian Borley, said:<\/p>\n 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.<\/p>\n We asked Borley where this understanding came from, and he told us:<\/p>\n In writing my article I had looked through various others and I saw the comment on another source.\u00a0Unfortunately, I cannot find that source now.<\/p>\n It is likely that most of the sandwiches that M&S sell will be zero rated.\u00a0However, I don\u2019t think it can be said for certain that this product is treated as zero rated.<\/p>\n It\u2019s 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.<\/p>\n In that context, M&S\u2019s default VAT treatment is fundamental to the RDSC pseudo-debate: <\/p>\n \u2014 if there is no VAT, they\u2019re probably categorising it as a cold sandwich, and there could<\/em> be a controversy. Figuring out which it is (without asking the company) might have been easy. Traditionally, one way of telling whether you\u2019ve been charged VAT on a product is to look at the receipt. If there\u2019s an asterisk next to an item\u2019s price, you\u2019ve paid VAT. M&S, however, seemingly doesn\u2019t do this.<\/p>\n Still, we wanted to check \u2014 and FTAV rarely gets to do shoe-leather tax reporting \u2014 so on Wednesday afternoon we wandered down to the nearest M&S and bought FOR PRIMARILY* REPORTING PURPOSES<\/strong> an RDSC (VAT rating unknown), some ready salted crisps (definitely standard-rated) and a banana (definitely zero-rated). Don\u2019t let anyone tell you journalism is easy.<\/p>\n One immediate discovery was that if the RDSC had ever been a sellout viral sensation in the Square Mile, that time may have passed** \u2014 the One New Change M&S food-to-go fridge had dozens of 75p sandos about to pass their best-before date:<\/p>\n A very-slightly later, more important discovery was that our receipt had no asterisks.<\/p>\n Having failed to do journalism the old-fashioned way, we got in touch with M&S.<\/p>\n \u2026who refused to tell us, or disclose whether any contact with HMRC had taken place \u2014 despite our pleading that here is a strong public interest in this case. <\/p>\n 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.<\/p>\n We could get caught up on wondering why M&S is so unwilling to share this type of information, but instead let\u2019s just accept this issue may be shrouded in mystery for some time.<\/p>\n Assuming the answer indeed is a sandwich, the obvious answer is this: nothing. We do nothing with it. It\u2019s trivial. Unless HMRC decides it\u2019s a good use of taxpayers\u2019 money to challenge M&S over this, this entire controversy exists purely in the realm of the hypothetical.<\/p>\n Despite that, some places have already started using the RDSC as a stick to beat VAT rules with \u2014 take for example the Institute of Chartered Accountants in England and Wales, whose technical manager Ed Saltmarsh says this demonstrates how VAT is \u201cweighed-down by complexity\u201d. We agree with the broad point, but this case doesn\u2019t (yet) illustrate it. <\/p>\n Not least because IT\u2019S CLEARLY A COLD SANDWICH.<\/p>\n \ud83d\ude1e<\/p>\n Fine, let\u2019s do this.<\/p>\n 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 \u2014 those are also are zero-rated, so there would be no benefit to the taxman from it.<\/p>\n 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.<\/p>\n If that were to happen, the role of the humble Victoria Sandwich would surely become crucial. It\u2019s practically the platonic ideal of a British cake (yes, despite being called a sandwich in this sliced form), it\u2019s more cake-like than the sando, but it\u2019s also similar in many key ways \u2014 consisting of something creamy and something strawberry-y inside two bits of sweetened, baked carbohydrate:<\/p>\n Surely no judge would deem that the RDSC is more confectionery-like than the Victoria Sandwich \u2014 or, even more radical, open the door to a future ruling that a Victoria sponge is not cake. Surely.***<\/p>\n Were this case ever to make it to a Tax Tribunal, there would probably be two significant points:<\/p>\n 1) How the judge chooses to interpret the recurrent advice that questions of this type, as per Lord Justice Jacob\u2019s guidance in Revenue & Customs v Procter & Gamble UK<\/em>, call for a \u201cshort practical answer\u201d. That assessment would involve going through a bunch of the sando\u2019s attributes, and assessing whether they are sandwichian.<\/p>\n As mentioned above, Grant Thornton\u2019s Daniel Rice has done what we think is a pretty good job at estimating how her assessment would go down, which we\u2019ve quoted below and interspersed with our thoughts:<\/p>\n Taste:<\/strong> It tastes of strawberries and cream and bread, unsurprisingly. This makes it a sandwich that I\u2019d tell my kids off for making, but a sandwich nonetheless.<\/p>\n Given a jam sandwich is a sandwich, it\u2019s hard to imagine a sweet\/fruity taste being any kind of delimiter for a sandwich.<\/p>\n Texture:<\/strong> Ditto, anything sandwiched by two pieces of bread is inherently sandwichy. Nobody can tell me otherwise.<\/p>\n An argument could be made about the bread being sweet(ened), but there\u2019s no shortage of savoury sandwich fillings to be bought in brioche-style buns, so this seems unlikely to preclude sandwichicity.<\/p>\n Admittedly, brioche could be complicated. In DuelFuel Nutrition Limited vs HM Revenue & Customs (covered here), Judge Hyde wrote:<\/p>\n 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. <\/p>\n But if things get to this level, it\u2019s worth noting that the RDSC bread isn\u2019t brioche, it\u2019s \u201cbrioche-style\u201d \u2014 and its ingredients list does not include egg. <\/p>\n 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.<\/p>\n Anyway, back to Rice\u2026<\/p>\n Ingredients:<\/strong> Bread is the key one here. Bread with a filling = sandwich.<\/p>\n This is probably as good a time as any to link to The Cube Rule.<\/p>\n Manufacturing process:<\/strong> This is a guess at this stage, but presumably manufactured very much like any other sandwich.<\/p>\n This is probably as good a time as any to link to that<\/em> Guardian Long Read.<\/p>\n Marketing:<\/strong> A Japanese sando; a Wimbledon special, unique novel food product, sweet treat. I don\u2019t think the marketing knows how to categorise the product any better than the VAT legislation does.<\/p>\n Interestingly the marketing team seem more confident than the packaging designers \u2014 a social media post launching the RDSC does<\/em> claim it as a sandwich (as well as a \u201csando\u201d and a \u201csarnie\u201d):<\/p>\n On the \u201csando\u201d element \u2014 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.<\/p>\n Packaging:<\/strong> 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.<\/p>\n An important bit of context here is that M&S doesn\u2019t write \u201csandwich\u201d on the front of any<\/em> of its sandwiches, probably because they\u2019re self-evidentially sandwiches:<\/p>\n Healthiness:<\/strong> Well it\u2019s got fruit in it, so that\u2019s something.<\/p>\n 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! <\/p>\n Here are the per-pack ingredients\/nutritional info for an RDSC compared with the M&S All-Day Breakfast sandwich:<\/p>\n We hope a judge wouldn\u2019t attempt a take on which one of these is healthier! And we don\u2019t think healthiness is an inherent characteristic of a sandwich!<\/p>\n Consumer perception:<\/strong> This is hugely unreliable for a novel new product; nobody knows what they\u2019re eating yet, although consensus online appears to be that whatever it is consumers like it.<\/p>\n Consumers probably recognise when they\u2019re eating a sandwich because it\u2019s a sandwich and it does things a sandwich oughta.<\/p>\n Placement in store:<\/strong> It\u2019s always sold out obviously, but it\u2019s sold out just next to all the other sandwiches.<\/p>\n Oddly enough the RDSC is not listed in the sandwich section of M&S\u2019s 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 \u2018Zoom by Ocado\u2019 app (where it is sold out).<\/p>\n Overall:<\/strong> it\u2019s food, it\u2019s probably a sandwich, just not as we know it.<\/p>\n Yes, but also a sandwich very much as we know it, because it\u2019s a sandwich.<\/p>\n One section that Rice has overlooked is circumstances of consumption<\/strong>, which readers may remember was a controversial point in the flapjack debate. As Judge Hyde wrote in the DuelFuel case:<\/p>\n 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\u2019s 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.<\/p>\n 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\u2019t somehow decide it isn\u2019t a sandwich, and then proceed to go down the \u201cthen what is it?\u201d route.<\/p>\n And if they were put in the most obvious situation of trying to figure out if it\u2019s a sandwich\u2026 well it seems pretty likely that it\u2019s intended to be consumed under conventional sandwiching conditions. Right? <\/p>\n 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.<\/p>\n *Status of items purchased at time of writing:<\/p>\n \u2014 Banana: eaten by FTAV. **A later visit on Wednesday to the M&S Simply Food on Tottenham Court Road uncovered just three remaining RDSCs, all reduced to \u00a31.25. There\u2019s another article in that somewhere.<\/p>\n ***MainFT\u2019s 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:<\/p>\nIs M&S, or is it not, charging VAT on this curs\u00e8d item?<\/h2>\n
\u2014 if there is VAT, they\u2019re probably categorising it as confectionery, and it seems unlikely HMRC would challenge them on that (why give up tax revenue?). <\/p>\nWhat do we do with this non-answer?<\/h2>\n
OK but is it though?<\/h2>\n
Why a judge might deem that the RDSC is more confectionery-like than the Victoria Sponge<\/h2>\n
2) If the answer to point 1 somehow isn\u2019t \u201cit\u2019s obviously a cold bloody sandwich\u201d, the outcome of a multifactorial assessment of the product\u2019s nature.<\/p>\n
\u2014 Ready-salted crisps: eaten by FT Climate desk. \u201cI really appreciated them but they weren\u2019t very nice\u201d \u2014 source.
\u2014 RDSC: chilling in Bracken House floor 2 south-side fridge, T+1 best before date.<\/p>\n