According to the BBC's detailing of HMRC's VAT guidelines in relation to biscuits and cakes, the following rules apply.
Biscuits
No VAT applies on chocolate chip biscuits where the chips are either included in the dough or pressed into the surface before baking. Nor does it apply on Jaffa Cakes, nor on Bourbon and other biscuits where the chocolate or similar product forms a sandwich layer between two biscuit halves and is not continued on to the outer surface.
VAT is levied, however, on wholly or partly coated biscuits including biscuits decorated in a pattern with chocolate or some similar product, gingerbread men decorated with chocolate (unless this amounts to no more than a couple of dots for eyes) and chocolate shortcake.
CakesNo VAT applies on marshmallow teacakes (with a crumb, biscuit or cake base topped with a dome of marshmallow coated in either chocolate, sugar strands or coconut), caramel or "millionaire's" shortcake consisting of a base of shortbread topped with a layer or caramel and (usually) chocolate or carob and flapjacks.
VAT is levied, however, on "Snowballs" (without the base described for marshmallow teacakes above), partly or wholly chocolate-covered shortbread and cereal, muesli and similar bars with honey or other added sweetening matter.
