Do you eat marshmallows with your hands or from a skewer?
HMRC needs to know – because it could affect how much VAT is charged.
The Court of Appeal has been looking at the latest decision from the Upper Tier Tax Tribunal (UTT) in respect of Innovative Bites Mega Marshmallows.
The UK’s VAT system has always had its quirks, but every now and then, a case comes along that highlights just how surreal it can be – see Jaffa Cakes or pasties, for example.
Background of the Case
Innovative Bites, a London-based importer and distributor of American confectionery, found itself at odds with HM Revenue & Customs (HMRC) over the VAT classification of its “mega marshmallows.” HMRC contended that these oversized treats should be classified as confectionery, attracting the standard 20% VAT rate. Innovative Bites, however, argued that due to their size and typical usage, they were primarily used for roasting over fires so they should be considered zero-rated food items.
The Legal Roast
The dispute led to a series of tax tribunal hearings. In September 2022, the First-tier Tribunal sided with Innovative Bites, noting that the mega marshmallows were marketed and sold specifically for roasting purposes. The tribunal highlighted factors such as their placement in supermarket barbecue sections and their substantial size, which made them less suitable for direct consumption without cooking.
HMRC appealed this decision, bringing the case before the Upper Tribunal. In April 2024, the Upper Tribunal upheld the initial ruling, dismissing HMRC’s appeal and reinforcing that the marshmallows were primarily intended for roasting, thus qualifying for zero-rated VAT status.
Court of Appeal Involvement
Undeterred, HMRC took the matter to the Court of Appeal. In March 2025, the Court of Appeal determined that the central issue was whether giant marshmallows are typically consumed by hand or roasted on a skewer. The case was remitted back to the First-tier Tribunal to establish the typical consumption method. Lord Justice Males remarked on the challenge of gathering evidence to determine how mega marshmallows are “normally eaten” and emphasized that the burden of proof lies with Innovative Bites to demonstrate that the product is not usually consumed by hand – the question for the FTT is whether “Mega Marshmallows” are “sweetened prepared food which is normally eaten with the fingers”.
It’s for the taxpayer – in this case, the business – to prove that their product is not “confectionery” typically eaten by hand. The decision recognises the difficulty of proving how people generally eat marshmallows. After all, who’s keeping marshmallow-eating logs?
Implications for Businesses
This case underscores the intricacies businesses face in navigating VAT classifications, especially for products that straddle conventional categories. The outcome could have significant financial implications for Innovative Bites, with a potential tax liability nearing £500,000.
Moreover, the case serves as a reminder of HMRC’s vigilance in enforcing VAT regulations and its willingness to pursue disputes through multiple levels of the judicial system.
Conclusion
As the First-tier Tribunal re-examines the consumption habits associated with giant marshmallows, businesses are reminded of the importance of clear product classification and the potential complexities that can arise. Staying informed and seeking expert advice remains crucial in navigating the UK’s VAT landscape.
While you may not be in the marshmallow business, this kind of tax dispute shows the broader point: businesses are dealing with complex legal and regulatory issues every day. Whether it’s tax, contracts, employment, or data protection, the landscape is full of potential pitfalls.
Just to be clear, I do not give tax or VAT advice – that’s for accountants and tax advisers. But this story shows exactly the kind of legal grey areas that I help businesses navigate. Contracts, compliance headaches, or just the day-to-day legal issues- the law finds its way into all of it.
If you run a business and want peace of mind that you’re legally covered, take a look at my VIP Legal package. It’s designed for ambitious businesses that want affordable, proactive legal support.
Because one day it’s marshmallows. The next day, it might be you.
