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In the United Kingdom, value added tax is payable on chocolate-covered biscuits, but not on chocolate-covered cakes.[11] McVities defended its classification of Jaffa Cakes as cakes at a VAT tribunal in 1991, against the ruling that Jaffa cakes were biscuits due to their size and shape, and the fact that they were often eaten in place of biscuits.[12] McVities insisted that the product was a cake, and allegedly produced a giant Jaffa cake in court to illustrate its point.[12] The product was assessed on the following criteria:[13][14]

The product's name was regarded as a minor consideration.
The ingredients were regarded as similar to those of a cake, producing a thin cake-like batter rather than the thick dough of a biscuit.
The product's texture was regarded as being that of a sponge cake.
The product hardens when stale, in the manner of a cake.
A substantial part of the Jaffa cake, in terms of bulk and texture, is sponge.
In size, the Jaffa cake is more like a biscuit than a cake.
The product was generally displayed for sale alongside other biscuits, rather than with cakes.
The product is presented as a snack and eaten with the fingers, like a biscuit, rather than with a fork as a cake might be. The tribunal also considered that children would eat them in "a few mouthfuls", in the manner of a sweet.

The court found in favour of McVitie's and ruled that the product should be considered a cake, meaning that VAT is not paid on Jaffa cakes in the United Kingdom.[11][15]

In Ireland, Jaffa cakes are regarded as cakes by Revenue as their moisture content is greater than 12%. As a result, they are charged the reduced rate of VAT (13.5% as of 2016).[16]