VAT Classification for Marshmallows: Why Giant Roasting Marshmallows Could Be Zero-Rated

A sticky dispute that went all the way back to tribunal

In late March 2026 the First‑tier Tribunal (Tax Chamber) handed down a decision on the VAT classification for marshmallows, which, while making headlines, carries significant implications for businesses selling food products. After years of appeals and remittances, Innovative Bites Ltd.’s oversized “Mega Marshmallows” do not typically require finger consumption, according to the tribunal’s conclusion. As a result, these giant marshmallows are not “confectionery” for VAT purposes and remain zero‑rated under Schedule 8 of the Value Added Tax Act 1994.

This decision follows a complicated procedural journey. In 2022, the tribunal initially ruled in favour of the taxpayer, holding that the product was not confectionery. HMRC appealed, and the Upper Tribunal upheld the decision. The Court of Appeal intervened in March 2025, finding that the earlier hearings had not addressed a narrow statutory question: whether the product is a “sweetened prepared food that is normally eaten with the fingers”. The appeal judges remitted the case back to a differently constituted First‑tier Tribunal to resolve this factual question.

By spring 2026, the remitted tribunal heard evidence on how consumers typically consume the product. It evaluated four methods of eating the marshmallows:

• Way A: Roasted and eaten from a skewer.
• Way B: Roasted, then removed from the skewer and eaten with fingers.
• Way C: Roasted and sandwiched between biscuits and chocolate to form a s’more.
• Way D: Eaten straight from the bag.

Using a simple inequality, the tribunal concluded:

• Non-finger methods (A and C) were more common than finger-eating methods (B and D).
• As a result, the product is not normally eaten with fingers.

Why the legal definition of VAT classification for marshmallows matters

Under Group 1 of Schedule 8 to the Value Added Tax Act 1994, food “of a kind used for human consumption” is generally zero-rated for VAT unless it falls under the confectionery VAT classification UK. However, certain items are excluded, such as confectionery, which is typically zero-rated VAT for food products. Item 2 specifies that confectionery includes chocolates, sweets, biscuits, and any sweetened prepared food normally eaten with the fingers. The dispute over marshmallows centres on this definition, particularly whether giant marshmallows marketed by Innovative Bites, which are larger and designed for roasting, should be considered confectionery.

Normal-sized marshmallows are widely regarded as confectionery, but the VAT classification for marshmallows becomes more complicated with larger, roasting-sized products. However, Innovative Bites’ giant marshmallows are marketed for roasting and sold in the barbecue section, not with confectionery. HMRC argued that the product, despite its size, should be taxed as sweetened prepared food eaten by hand, thereby falling under confectionery VAT classification UK The business, however, argued that due to its size and use in roasting, it should be classified more like a cooking ingredient. This case highlights the importance of precise VAT classification, as the 20% VAT can significantly impact retailers’ margins, forcing price increases or eroding profits.

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From campfires to case law: the tribunal’s reasoning

During the remitted hearing, the tribunal considered several forms of evidence, including witness testimony, packaging, marketing materials, and the physical characteristics of the product. The tribunal specifically focused on how consumers typically consume the product, evaluating four distinct methods of eating:

• Way A: Roasting on skewers (does not involve fingers).
• Way B: Removing the roasted marshmallow from the skewer to eat it (involves fingers).
• Way C: Roasting and making s’mores (dispute whether this involves fingers).
• Way D: Eating straight from the bag (involves fingers).

The key dispute revolved around Way C, which involves roasting the marshmallow and using it in a s’more. The tribunal held that making a s’more does not qualify as eating the marshmallow with fingers for two reasons:

1. Holding the biscuits, not the marshmallow: The consumer holds the biscuits when preparing the s’more, not the marshmallow itself.
2. Marshmallow becomes an ingredient: Once the marshmallow is incorporated into a s’more, it is considered part of the whole dish, not just the marshmallow alone.

Having addressed the finger-eating methods, the tribunal then evaluated whether the non-finger methods (Ways A and C) were more common than the finger-eating methods (Ways B and D). Evidence showed the following:

• Regular-sized marshmallows are more commonly purchased for snacking, while the larger product is marketed near barbecue items, emphasising roasting.
• The packaging itself reflected this, with roasting and s’mores instructions featured prominently, while the “just snacking” instruction appeared last.

Although the evidence was not perfect, the tribunal followed established case law, which requires them to make decisions based on the available facts rather than defaulting to burden-of-proof arguments. The judges concluded that roasting and s’mores were the predominant methods of consumption, rather than eating with fingers.

Consequently, the tribunal ruled that the product is not normally eaten with the fingers. Coupled with the earlier conclusion that the product is not confectionery in the usual sense, the tribunal allowed the appeal and upheld the zero-rate VAT status for the marshmallows.

Implications for the food and drink industry

This ruling underscores the complexity of the UK’s food VAT regime and shows that classification depends on how consumers interact with a product, not just its ingredients. Businesses developing innovative food products must examine the following:

• Packaging and marketing – Where products are positioned in stores and how they are described can influence judicial findings.
• Size and design – The tribunal inferred that the large size makes roasting more likely and snacking less convenient.
• Consumer behavior— Businesses may need to gather evidence about how customers actually consume their products. Lack of evidence could shift the burden back to the taxpayer.

The decision also highlights the risk of inconsistent outcomes for businesses with zero-rated VAT for food products, which can change based on product use and consumer habits. In March 2025, the Court of Appeal interpreted Note 5 as a conclusive definition: if a product fits the description, it is confectionery, unless applying the definition would be absurd. The Court remitted the case precisely because the original tribunal did not decide whether the product was normally eaten with fingers. Had the remitted tribunal found that finger methods were more common, the product would now be standard‑rated.

Other cases illustrate similar tensions. The Guardian’s report on the earlier proceedings notes that HMRC compared giant marshmallows to cooking chocolate and tiny marshmallows, which are ingredients and zero‑rated, while Innovative Bites argued that roasting changes the product’s texture. 

Practical steps for businesses

Given the stakes, food manufacturers and retailers should:

• Audit product portfolios: 

Ensure that VAT treatment aligns with legislation and case law. Items that could be classed as confectionery should be reviewed, particularly if they are marketed as snacks or include sweet ingredients.

• Document marketing and usage

Maintain evidence of how products are packaged, labelled, and promoted. If products are intended for cooking or roasting, ensure that instructions and images reflect these uses.

• Gather consumer insights

Where HMRC raises an assessment, businesses may need to provide evidence of how consumers actually eat their products. Surveys, sales data and usage studies can support claims that a product is an ingredient rather than a snack.

• Seek professional advice before launching new products

VAT classification can hinge on subtle factors, and early engagement with advisors can prevent costly disputes.

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How Apex Accountants & Tax Advisors can help

Determining whether an unusual food product is “confectionery” requires navigating legislation, case law and HMRC practices. Apex Accountants & Tax Advisors offers specialist VAT services for the food and drink sector. Our team keeps abreast of tribunal decisions and can:

• Review product lines to identify VAT risks and opportunities.
• Advise on packaging and marketing so that the presentation of products supports the intended VAT treatment.
• Prepare documentation and evidence to defend VAT positions during HMRC enquiries or appeals.
• Provide training for finance and marketing teams on the implications of VAT legislation and recent cases.

If your business is developing or importing food products with novel characteristics, a proactive VAT review can prevent expensive surprises. Contact Apex Accountants today for a free consultation on how we can support your VAT compliance and planning.

Frequently asked questions

Are giant marshmallows standard-rated or zero-rated for VAT?

The remitted First-tier Tribunal concluded that Mega Marshmallows are not normally eaten with the fingers, so they do not meet the definition of “confectionery” in Note 5 and remain zero-rated. However, HMRC may still appeal, so businesses should monitor developments.

What does Note 5 to Schedule 8 of the Value Added Tax Act 1994 say?

Note 5 states that “confectionery” includes chocolates, sweets and biscuits, certain preserved fruits, and any item of sweetened prepared food normally eaten with the fingers. This inclusive definition means that if a product fits the description, it will generally be standard‑rated.

How did the tribunal decide that roasting and s’mores consumption were more common?

Evidence showed that the product is marketed for roasting and located in supermarket barbecue and world‑food aisles. The tribunal also noted that typical consumers buy normal marshmallows for snacking. On this basis, eating from skewers and in s’mores was deemed more frequent than eating straight from the bag.

Does size affect VAT classification of marshmallows?

Yes. The product’s large size made it impractical for snacking and more suitable for roasting. The tribunal inferred that consumers would not usually eat oversized marshmallows straight from the pack, differentiating them from smaller marshmallows, which are treated as confectionery.

Can HMRC appeal the 2026 tribunal decision?

HMRC has the right to seek permission to appeal within 56 days of the decision. The Edinburgh Chamber of Commerce’s commentary notes that HMRC might argue that the taxpayer did not provide enough evidence about consumer behaviour. Businesses should therefore continue to monitor for further appeals.

What steps should businesses take when uncertain about VAT classification?

Consider seeking advice from VAT specialists, reviewing how products are marketed and consumed, and preparing evidence to support your position. Early engagement with professional advisors like Apex Accountants can reduce the risk of assessments and penalties.