VATupdate Newsletter Week 11 2025

FLIPPING

Last week saw the annual Inter-Livery Pancake Race at Guildhall Yard, where competitors in elaborate costumes sprinted around the square, skilfully flipping pancakes in their frying pans. A crowd gathered, cheering them on as airborne batter met with varying degrees of success. But amid the fun, have you ever stopped to consider the VAT implications of Pancake Day?

As with many food-related VAT matters, the treatment of pancakes depends on their form. If you buy the raw ingredients—flour, eggs, milk—you’ll be pleased to know they’re zero-rated in the UK. But opt for a pre-made pancake mix, and suddenly you’re looking at 20% VAT. Convenience, it seems, comes at a price.

The moment a pancake leaves your kitchen and enters a café or food stall as a freshly cooked treat, in many countries it becomes standard-rated for VAT. The UK, as well as other countries, specifically has interesting rules when it comes to the VAT rate of foodstuff.

Even toppings can complicate matters—maple syrup, for example, is standard-rated, while a squeeze of lemon juice remains VAT-free. And should you dare to fold or fill your pancake, you might be straying into the world of crepes, where VAT classifications can be as slippery as a well-buttered frying pan. And that’s the UK. In France, try to find the correct VAT rate for chocolate: it depends on the form, the use, the composition, and even the packaging…

But what about the Pancake Race itself? If tickets were sold, VAT might be due—unless the event qualified as a charitable fundraiser, in which case it could be exempt. And if you needed a new frying pan for the occasion, rest assured it’s standard-rated (unless, oddly, it was part of a children’s cooking set, where VAT rules take an unexpected turn).

This reminds us of the long-running debate over the VAT treatment of meal deals and combo offers, most notably in the McDonald’s case. The case examined whether Happy Meals—bundled food items including a mix of standard and zero-rated (or reduced-rated) products—should be taxed as a single supply or separate components. The ruling emphasized that VAT treatment depends on whether the items are sold as a composite supply (where one element dominates) or as separate supplies. A similar question could arise for pancake deals: does a bundle that includes a pancake, toppings, and a drink attract a uniform VAT rate, or should each component be taxed separately?

As always with VAT, the devil is in the detail. So next time you flip a pancake, consider that the tax authorities are flipping through VAT regulations just as carefully. Let’s hope they don’t get them stuck to the ceiling.

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