The supply of food is in general zero-rated for VAT: see section 30 and Schedule 8, Part II, Group 1, item 1 of the Value Added Tax Act 1994. But there are exceptions. One exception is confectionery: see item 2 of the Excepted Items. But there is an exception to that exception: cakes or biscuits are in general also zero-rated. There is however an exception to that exception to the exception, namely biscuits wholly or partly covered with chocolate. They are standard-rated.

For many years, starting with the introduction of VAT in 1973, the Commissioners of Customs and Excise took the view that Marks & Spencer teacakes, which are covered with chocolate, were biscuits and therefore standard-rated. Marks & Spencer accounted for VAT on that basis. But in September 1994 they admitted they had been wrong. They were actually cakes and should have been zero-rated. Marks & Spencer claimed repayment of all the VAT for which they had wrongly accounted over the years, totalling £3.5 million…

— Marks and Spencer plc v. Her Majesty’s Commissioners of Customs and Excise