A Tasty VAT Dilemma - to be processed? | Winchester Bourne Limited

A Tasty VAT Dilemma - to be processed?

31/03/2025

As British Summer Time commences, we can all look forward to long balmy evenings, shared with friends, a fire pit and toasted marshmallows – delicious!

But for HMRC there is a battle going on behind the scenes, a dispute over a tax bill that amounts to nearly half a million pounds. They argue that the mega marshmallows, sold by Innovative Bites, are confectionery and therefore subject to VAT. The company argues that giant marshmallows are normally toasted and therefore fall within unprocessed foods and therefore free from VAT.

A reminder, all unprocessed foods such as raw meat, fish, fruit and vegetables are zero rated for VAT. HMRC sees these marshmallows, not as unprocessed, but as confectionery – sweetened, prepared food normally eaten with the fingers and therefore subject to VAT.

In 2022 the First-tier Tribunal sided with the company, agreeing that these large items were specifically for toasting and found in the BBQ aisles of supermarkets. HMRC then took the case to the Upper Tribunal and argued that they are a sweetened prepared food, normally eaten with the fingers. The appeal by HMRC was dismissed in 2024. HMRC appealed again. The case has been sent back to the First-tier Tribunal.

It appears that a final decision will come down to the size of the product and whether they are eaten using the fingers, or a skewer!

The challenges of VAT categorisations continue.

Enjoy skewering and toasting your oversized marshmallows this summer!