Are Jaffa cakes biscuits?

[Biscuit]

That is actually incorrect, they are in the biscuit section at tescos.

The conundrum continues.......

It has taken two years for me to solve it but I have stumbled upon and answer.

http://ex-parrot.com/~chris/wwwitter/20030629-another_miscellany.html

Jaffa Cakes
Another (sub)urban legend: Jaffa Cakes are cakes, as the name suggests and contrary to the claims of HM Customs and Excise, who argued that they were biscuits. This was not an exercise in pedantry but an attempt to levy VAT on them: cakes are `food' and zero rated, while biscuits are `luxury items', and attract 17.5% tax. (Note that the McVities Jaffa Cake web site calls them `biscuits' anyway....)

The matter was settled with this test: a cake starts off soft and goes hard when it is stale, but a biscuit starts off hard and goes soft when stale. Jaffa Cakes harden when stale.

I can't find a proper report of the case, but it's consistently described on the web and I'm happy that the above is right. For instance, from reader correspondence at silicon.com,

The matter was settled over ten years ago by a VAT tribunal in a very expensive case. McVities argued that they were indeed cakes (and hence zero-rated for VAT), while HM Customs and Excise argued that they were biscuits and hence subject to 17.5 per cent VAT. McVities won the case, primarily because biscuits are hard when fresh and soft when stale whereas cakes are soft when fresh and hard when stale; Jaffa Cakes, of course, fall into the latter category. I have a recollection that McVities also baked a cake-sized Jaffa Cake for the tribunal chairman to support their legal arguments. God, I should get out more...
Or, from the South China Morning Post,

Chocolate biscuits are defined as luxury items, so liable to the tax, while cakes are basic foodstuffs and zero-rated. McVities argued that a Jaffa Cake is just that.

The famous case ended up centring on how Jaffa Cakes aged. The firm argued that a biscuit was hard when fresh and soft when stale. Jaffa Cakes, in contrast, went from soft to hard. The company won.

Or, from solicitors Clifton Ingram,

The `when is a cake not a cake?' riddle was solved some years ago and related to Jaffa Cakes. A Jaffa Cake was found to be a cake, not a biscuit, and therefore outside the confectionery exception.
And, irrelevantly... there I was thinking that `Suburban Legends' would make a great name for a band -- and it turns out, it already is! You can listen to their music at MP3.com. If I try to review music, you'll all laugh. (Maybe you do anyway.) So listen to it yourselves. You'll need to `register' to download the MP3s.