M&S’s Viral Strawberry Sandwich, A Tasty Treat with a Tax Twist!

Marks & Spencer has recently attracted widespread attention for launching a “Strawberries and Cream” sandwich. This limited-edition product features sweetened bread, whipped cream, and fresh strawberries. While many consumers are intrigued by the flavour combination, tax authorities have a different concern.

The sandwich has sparked a debate about tax law. Although it is available as part of M&S’s meal deal and served cold like a traditional sandwich, its sweet ingredients mean it might be subject to Value Added Tax (VAT).

Understanding the VAT issue

In the United Kingdom, many cold, savoury foods such as sandwiches are zero-rated for VAT. This means that businesses do not need to charge VAT on them. However, sweet foods that resemble desserts or confectionery are usually subject to the standard VAT rate of twenty percent.

The M&S “Strawberries and Cream” sandwich falls into a grey area. While it is a sandwich in name, it contains sweet ingredients and is designed to be eaten by hand, much like a dessert. If HMRC (His Majesty’s Revenue and Customs) decides that it qualifies as confectionery rather than a standard sandwich, M&S could be required to add VAT to the price or even pay VAT on past sales.

This highlights how small differences in how a product is made or presented can have major financial implications for a business.

Similar food tax disputes

This is not the first time food items have caused legal disagreements about VAT. Previous examples include:

• The Jaffa Cake case: McVitie’s successfully argued that Jaffa Cakes are cakes rather than biscuits, which allowed them to avoid VAT. Cakes are zero-rated, while chocolate-covered biscuits are not.

• The marshmallow decision: HMRC ruled that regular and jumbo marshmallows should be taxed differently depending on how they are eaten.

  
  

These cases show how complex and sometimes inconsistent VAT rules can be when it comes to food.

Why business students should pay attention

This story provides a real-world example of how tax regulations can influence pricing, product design, and profit margins. When a business innovates or introduces a product that does not fit neatly into existing categories, it can face unexpected legal or financial challenges.

In this case, a seemingly simple decision to add sweetened bread and fruit to a sandwich may lead to a legal and financial debate that reaches far beyond the supermarket aisle.

Questions for business students to consider:

1. Do you think M&S’s strawberry sandwich should count as a dessert for tax purposes?

2. How could adding VAT to this product affect how well it sells and who benefits?

3. Can you design a creative new food product for M&S to launch following the success of their strawberries and cream sandwich, and explain whether it would be subject to VAT or not?