A recent tribunal decision on the VAT treatment of giant marshmallows is a timely reminder that product descriptions and everyday behaviour can affect VAT outcomes. The case concerns oversized Mega Marshmallows sold by Innovative Bites Ltd and the question of whether they should be standard rated as confectionery or zero rated as food.
Although the subject matter is light hearted, the point is practical. For some products, VAT turns less on what the item is called and more on how people typically use and consume it. In this case, the tribunal had to think like a consumer at a barbecue, but write like a judge, which is a combination that can get sticky.
The legal question
Supplies of food of a kind used for human consumption can fall within the zero rate in Group 1, Schedule 8 of the Value Added Tax Act 1994, but that treatment does not apply to certain excepted items, including confectionery. The legislation also widens what counts as confectionery for this purpose. It includes:
“any item of sweetened prepared food which is normally eaten with the fingers”.
The parties agreed that Mega Marshmallows were sweetened prepared food. The dispute was whether they were normally eaten with the fingers. If yes, the supplies were standard rated. If no, the supplies could remain zero rated. In other words, the outcome turned on a hands on question.
The product and why it mattered
Mega Marshmallows are larger than typical marshmallows and strongly associated with roasting, often on a skewer, including use in smores. Those features might sound like marketing fluff, but they mattered because they helped the tribunal decide what normally happens when people eat the product. In this dispute, size did not just matter, it shaped the evidence.
A short history of a surprisingly well travelled marshmallow
- HMRC assessed VAT on the basis the product was confectionery, issuing assessments totalling £472,928 for supplies between June 2015 and June 2019.
- The business appealed and won in the First tier Tribunal.
- HMRC appealed and lost in the Upper Tribunal.
- HMRC then took the case to the Court of Appeal, which sent it back to the First tier Tribunal because the tribunal had not made a clear finding on the specific statutory test of whether the product was normally eaten with the fingers.
Several years of litigation ultimately hinged on one deceptively ordinary question: what do people do with their hands when they eat a giant marshmallow? It was a long road for a product that mostly travels from a bag to a campfire.
How the tribunal treated the word normally
The remitted tribunal treated normally as a more often than not test. The tribunal needed to decide whether, in typical real world use, the product is eaten with the fingers more than 50 percent of the time.
That framing matters because it moves the debate away from labels and toward behaviour. It also explains why evidence about use, preparation, and presentation can become decisive in borderline food cases. When the law asks what usually happens, the facts have to do the heavy lifting.
The four ways of eating the product
To answer the question, the tribunal considered four common consumption scenarios and labelled them A to D:
Way A
Roasted on a skewer and eaten from the skewer, without using fingers.
Way B
Roasted on a skewer, removed after cooling, then eaten with fingers.
Way C
Roasted and used as part of a smore, so the marshmallow becomes an ingredient within something else.
Way D
Eaten straight from the packet with fingers as a snack.
The tribunal then compared which routes were more likely than others in order to decide whether finger eating was the dominant pattern overall.
The maths equation
The tribunal boiled the point down to a simple bit of school maths. It compared the most likely non finger ways of eating the product with the finger ways.
A > B and C > D therefore (A + C) > (B + D)
Think of it like this:
- Way A and Way C are the no fingers needed routes
- Way B and Way D are the finger food routes
- If A beats B, and C beats D, then A plus C beats B plus D
So, overall, the tribunal decided that Mega Marshmallows are more often eaten without fingers than with fingers, which meant they were not normally eaten with the fingers and did not fall within the confectionery inclusion for VAT purposes.
Why this matters for businesses, even if the facts are funny
Statutory wording drives the analysis
The Court of Appeal intervention is a reminder that outcomes can turn on the precise statutory test. Even where broader commercial factors feel persuasive, the tribunal still has to answer the exact question the legislation asks. The moral is simple: follow the wording, even when it feels like a campfire story.
Evidence about normal use can decide the outcome
When the law asks what normally happens, evidence about typical use becomes important. Here the focus was not ingredients or manufacturing, but what consumers usually do at the point of eating. In VAT, behaviour can be the main ingredient.
Product positioning still matters, but as evidence of behaviour
Marketing, packaging, size, shelf placement, and seasonal sales patterns are not the legal test. They are often the evidence used to decide what the normal pattern of consumption looks like.
Practical takeaways
- Be clear on how customers use the product
If a product has multiple uses, be ready to explain which use is most common and why. - Align packaging messages with the intended VAT position
Mixed messages can make it harder to argue a consistent normal use. - Expect focus on consumer behaviour where the legislation does
If the statutory test turns on how an item is eaten, the dispute can turn on that factual question, sometimes quite literally on fingers.
Closing thought
The Mega Marshmallows saga is a reminder that VAT law is serious even when the subject matter is sugary foam. The difference between zero rated and standard rated can come down to a small everyday detail, like whether people usually eat a product with their fingers, and in this case, a simple inequality became the headline. It is a sweet example of how technical rules can hinge on ordinary habits.
