A recent tax tribunal has settled a chocolate-related VAT question: are Nutella Biscuits ‘chocolate-covered’? 

In the case of Ferrero Ltd v HMRC, the First Tier Tribunal ruled that Nutella Biscuits should be zero-rated for VAT. 

The background 

Under VAT rules, most biscuits are zero-rated – meaning no VAT is charged – unless they are wholly or partly covered in chocolate (or a substance that is similar to chocolate). 

HMRC argued that Nutella Biscuits should be standard-rated because they contained a visible ring of chocolatey filling. 

What the tribunal found 

Each Nutella Biscuit has layers – a Nutella filling and a ring of chocolate-like substance enclosed between two baked biscuit layers. 

While the chocolatey ring was visible, it wasn’t part of the outer surface of the biscuit. The tribunal decided it couldn’t count as “covering”. 

In other words, the biscuits weren’t covered in chocolate – and could therefore remain zero-rated. 

Why it matters 

This case highlights just how complex VAT rules can be when it comes to food products. Even small details in how an item is made or presented can change its VAT treatment, and mistakes can be expensive. 

If you’re launching or selling a new food product, it’s worth checking how VAT applies before you start trading.