Scotland’s two biggest confectionery companies have won a £3 million battle with the taxman to prove that snowballs are cakes.
Tunnock’s and Lees of Scotland launched a court bid to prove that the coconut-covered treat should be classified as a cake.
They argued that sales of the product should be exempt from VAT like other cakes.
HM Revenue and Customs (HMRC) had told confectioners in 1995 that snowballs would be subject to the standard rate of VAT as they did not regard them as a cake.
The ruling had never been challenged but last year the Lanarkshire-based firms attempted to reclaim VAT on sales of snowballs for the first time.
The bid was rejected but they have now successfully appealed the decision at a tax tribunal hearing in Edinburgh.
The bizarre case saw judge Anne Scott and lawyers for both sides submit to a taste testing of snowballs and other sweet products.
In a written ruling, Judge Scott has now declared that snowballs are cakes and should be treated as such for tax purposes.
She said: “The appellants contended that they are cakes, and that they should be zero rated. HMRC contended that they are not, and that they should be standard rated.”
The judge went on: “A snowball looks like a cake. It is not out of place on a plate full of cakes. A snowball has the mouth feel of a cake. Most people would want to enjoy a beverage of some sort whilst consuming it.
“It would often be eaten in a similar way and on similar occasions to cakes; for example to celebrate a birthday in an office. We are wholly agreed that a snowball is a confection to be savoured but not whilst walking around or, for example, in the street.”