VAT: 12 of the oddest tax rules explained

Gingerbread Men for sale in Borough Market, London VAT
Gingerbread men with chocolate eyes are VAT free but those with a chocolate belt are taxed at 20%. Photo: Getty

VAT recently celebrated its 50th birthday in the UK. Over the years it’s certainly grown into an impressive beast — raking in almost £160bn in the year to March and accounting for roughly one in every six pounds we pay in tax.

However, it’s hardly a sensible and mature tax. The fact it has its origins in the 1940 purchase tax means there’s a heavy emphasis on ruling out anything considered vaguely luxurious or wasteful and, as a result, we’re left with a series of bizarre and archaic rules.

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So to celebrate the 50th anniversary of the tax, here are 12 of the oddest.


Popcorn is taxed at 20% VAT while microwavable popcorn is taxed at 0%.

This is because the law specifically states that anything that’s puffed up is needlessly luxurious.

A caucasian person using a modern laptop computer with a mug of tea and chocolate biscuits on a dark textured work desk.
Chocolate chip cookies face 0% VAT, while chocolate-covered biscuits are taxed at 20%. Photo: Getty

Chocolate biscuits

Biscuits that have the chocolate chips pressed into the dough, face 0% VAT, while chocolate-covered biscuits are taxed at 20%. This is because the rules specifically refer to the covering as taxable.

Gingerbread men

Gingerbread men with chocolate eyes are VAT free but those with a chocolate belt are taxed at 20%.

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Essentially any fancy chocolate decorations covering more than 1% of the surface are considered a luxury and therefore subject to VAT.


Cake is considered part of the basic necessities of life, so cakes aren’t taxed — even when covered in chocolate.

This led to the famous case of the Jaffa Cake, which was eventually ruled to be a cake and therefore zero-rated, largely because it goes hard when stale — like a cake, and not soft — like a biscuit.

Jaffa Cakes boxes by McVities in store display VAT
You don't have to pay VAT on Jaffa Cakes. Photo: PA/Alamy


You don’t pay VAT on the flapjack you buy in the vending machine in the corridor at work (because it’s considered to be a cake you take away and eat elsewhere), but you pay 20% on the one from the machine in the canteen (because it’s assumed to be part of the catering).


Potato crisps are taxed at 20%, but there’s no VAT on crispy snacks made from other things like tortilla chips or twiglets.

Dried fruit and nuts

Dried fruit or nuts sold in the bakery aisle are tax-free cooking ingredients. Those sold with snacks or confectionary are taxed at 20%.

Different pasties being displayed in a windows shop in Cornwall. VAT
The VAT rules for pasties are some of the oddest. Photo: Getty


If a pasty is cooked and left in a cabinet to cool down, then it can be sold while it’s still warm without tax.

However, if it's cooked it to order, sold as ‘hot’, the cabinet is heated, or it is put it in a foil-lined bag, it’s taxed at 20%.


If you buy a gerbil in a pet shop you’ll pay tax on it. If you buy a rabbit, you’ll pay no tax on it, because the taxman classes rabbits as food.


If a service charge is included on a bill there’s 20% tax on it, whereas a tip that’s freely given is tax free.

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