04 May 2026
In 2025, the Court of Appeal sent the case of Innovative Bites Ltd v HMRC to the First-tier Tribunal (FTT), telling them to determine whether ‘Mega Marshmallows’ are a “sweetened prepared food which is normally eaten with the fingers”.
The VAT legislation zero‑rates food, but this excludes “confectionery”. Confectionery is defined as “any item of sweetened prepared food which is normally eaten with the fingers”.
“Mega Marshmallows” are approximately 5cm in diameter and are primarily intended for roasting over fires and being used to make ‘s’mores’. In their March 2026 ruling, the FTT found that the product was more frequently eaten by non‑finger methods than by with-finger methods. Mega-marshmallows are therefore not standard-rated confectionery items and can be zero-rated for VAT.
This means that currently, only standard-sized marshmallows are subject to VAT at 20%. Mini marshmallows, when held out for sale as a baking ingredient, are zero-rated along with their mega-sized counterparts!
This case demonstrates how complicated VAT can be – if you have any doubt about the VAT rate you should be applying to your products and services, please do get in touch.
