Preheat oven to 170°c. Line a 12-hole medium muffin tray with paper cases.
Sift flour and sugar together into a mixing bowl. Add butter, eggs and vanilla. Beat with electric beaters on low speed until combined. Add 2 Tbsp of the milk and beat for 2 minutes until smooth and pale. Stir in remaining milk and sprinkles.
Spoon evenly into paper cases. Bake for 20 minutes until golden. Transfer to a wire rack and allow to cool completely.
Meanwhile, to prepare buttercream, beat butter with electric beaters for 5 minutes until very pale and creamy. Add 1 cup of the icing sugar and beat for 2 minutes. Repeat twice more with remaining sugar, beating each addition for 2 minutes. Add milk and vanilla and beat until smooth. Brush inside of a piping bag (with a star-shaped nozzle) with food colouring, before filling with buttercream. Pipe onto cooled cupcakes and add extra sprinkles.
For the ears, roll out 50g of fondant 2mm thick and cut out small circles using a 2cm cutter. Shape to slightly oval and pinch each end to form ears. Place onto a plate and leave to dry. For horns, divide remaining fondant in half and colour half with yellow food colour. Using your palms, roll each to a long thin roll. Twist one of each roll together like a rope. Cut into 6cm lengths and roll one end thin for the point of horn. Leave to dry overnight. Add ears and horns to cupcakes.