In Innovative Bites Ltd v HMRC [2026] TC09831, the First Tier Tribunal (FTT) again found in favour of Innovative Bites Ltd, holding that its 'Mega Marshmallows' were zero‑rated for VAT as food; they were not confectionery.
Innovative Bites Ltd, a wholesaler of American sweets and treats, sold oversized marshmallows marketed as 'Mega Marshmallows', primarily intended for roasting as part of s’mores.
- HMRC Assessed the company for £472,928 in VAT for the period June 2015 to June 2019, arguing that the products were Standard‑rated confectionery.
- In 2022, the First Tier Tribunal (FTT) Held that the products were not confectionery in the ordinary sense, applying a multi‑factorial assessment that considered size, marketing, packaging and typical manner of consumption.
- That decision was subsequetly Upheld by the Upper Tribunal (UT).
- In 2025, the Court of Appeal (CoA) Allowed HMRC’s appeal, holding that insufficient attention had been paid to the statutory wording in Note 5 to Group 1 Schedule 8 VATA 1994.
- The CoA remitted the case to a differently constituted FTT to determine whether Mega Marshmallows were a “sweetened prepared food which is normally eaten with the fingers”.
Schedule 8, Group 1 VATA 1994 zero‑rates food, but excludes 'confectionery'. Note 5 defines confectionery as any item of sweetened prepared food which is normally eaten with the fingers.
The newly constituted FTT found that:
- The remitted issue should be approached as a question of fact, considering evidence about how typical consumers used Mega Marshmallows.
- 'Normally' means 'more often than not', i.e. over 50% of occasions of consumption.
Four principal methods of consumption were examined:
- Roasted and eaten from the skewer.
- Roasted on a skewer and then eaten with the fingers.
- As part of a s'more.
- Directly from the packet with the fingers.
Taking these together, the FTT found that the product was more frequently eaten by non‑finger methods than by finger methods.
- On that basis, Mega Marshmallows were not normally eaten with the fingers and therefore did not fall within Note 5.
The appeal was allowed. HMRC’s assessments were overturned.
Useful guides on this topic
Food, catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises?
Appeals: VAT
How do I appeal a VAT penalty? How can I request a Statutory Review? How do I appeal an HMRC decision?
Assessments: Best judgment & time limits
What is a 'best judgment' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgment assessment? What are the time limits for a VAT assessment?
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