QE Tax Flash: A Win for Roasted Mega Marshmallows

Mega Marshmallow victory… finally, but it took seven years, four tribunals and a detailed analysis of how people eat marshmallows. The Tax Tribunal has now confirmed that “Mega Marshmallows” are zero-rated for VAT (Innovative Bites Limited v HMRC [2026] UKFTT 500 (TC)). Finding they are not normally eaten with the fingers, this decision means “Mega Marshmallows” are not excluded confectionery and therefore fall within the zero-rating for VAT purposes of food of a kind used for human consumption. On that basis, Innovative Bites avoids a VAT assessment of circa £473,000.

The Tribunal’s answer required a systematic analysis of four distinct marshmallow eating methods: (a) direct from the skewer (no fingers), (b) taken off the skewer and eaten by hand (fingers), (c) assembled into a s’more (interestingly no fingers, the biscuit was held to be the implement used for eating, the marshmallow just an ingredient like ketchup in a burger), or (d) eaten straight from the bag (fingers). The Tribunal’s mathematical conclusion was (A+C) > (B+D). The non-finger methods win because A is more frequent than B, and C is more frequent than D.

Liesl Fichardt: “Aside from the novelty factor that VAT classification disputes often entail, they illustrate how significant legal questions can arise when deceptively simple language in a tax statute must be applied to an infinite variety of products, structures or transactions.” 

Emily Au: “The VAT code often comes to life in classification decisions like Innovative Bites. A sweet result for the taxpayer and proof that in VAT litigation, creative legal presentation and practical reality can prevail.”

Julius Berling: “Part of HMRC’s contention was that Innovative Bites should lose because they had failed to discharge their burden of proof. The Tribunal disagreed; the burden of proof is a last resort where no rational finding can otherwise be made.”