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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Innovative Bites Ltd v Revenue and Customs (VAT, Zero-Rating, Food, Confectionery, Note 5 Item 2 of Group 1 Schedule 8 Value Added Tax Act 1994 - Whether oversized marshmallows normally eaten with the fingers) [2026] UKFTT 500 (TC) (31 March 2026) URL: https://www.bailii.org/uk/cases/UKFTT/TC/2026/500.html Cite as: [2026] UKFTT 500 (TC) |
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Appeal reference: TC/2019/06287 |
TAX CHAMBER
Judgment Date: 31 March 2026 |
B e f o r e :
TRIBUNAL JUDGE MATTHEW DONMALL
MOHAMMED FAROOQ
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| INNOVATIVE BITES LIMITED |
Appellant |
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| - and - |
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| THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS |
Respondents |
____________________
For the Respondents: Charlotte Brown of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs
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Crown Copyright ©
Value Added Tax, Zero-Rating, Food, Confectionery, Note 5 Item 2 of Group 1 Schedule 8
Value Added Tax Act 1994. Whether oversized marshmallows normally eaten with the fingers – no. Appeal allowed.
Introduction
Legislative background
Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.
… for the purposes of item 2 of the excepted items 'confectionery' includes chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.
Procedural history
The assessment
FTT22
19. The Product is an oversized marshmallow which the appellant originally imported from the United States. It is now produced and imported from Belgium. The marshmallows are broadly cylindrical in shape, approximately 5cm in height with a diameter of 3.5 – 4.5 cm. In comparison, regular marshmallows are also cylindrical, 2cm in height with a diameter of 2.5cm. The size of the Product means that it is more easily and more effectively roasted on a skewer over an open fire or flame. It can then be either eaten as a roasted treat, once cooled, or used to create a s'more.
20. The Product is sold in various package sizes. We were provided with a 550g pack which contains approximately 27 marshmallows. The printed packaging has varied over the period we are concerned with, which is June 2015 to June 2019. The following is a description of the packaging in the period up to March 2017.
21. The front of the packaging has the words "Mega Marshmallows" in large type. The Product is said to be "made to a delicious American recipe" and is said to be "perfect for roasting, s'mores or just snacking". Below that narrative are three diagrammatical representations from left to right of a marshmallow being roasted over a fire, a s'more and a marshmallow with a bite taken out, representing snacking.
22. The reverse of the packaging repeats the diagrammatical representations of a marshmallow being roasted and of a s'more, alongside "Instructions for Use" which are as follows:
1. Stick the marshmallows on a skewer.
2. Keep the stick approx. 20 cm above the heat. Do not hold the mallows in the flames, to avoid burning.
3. Keep on turning the stick, to obtain a caramelised outer skin with a liquid, molten layer underneath.
4. Let the marshmallows cool down.
5. Enjoy your snack.
23. Alongside those instructions is the following warning:
ATTENTION!
1. Before eating, let the marshmallows cool down.
2. Do not hold them in the fire.
3. When you use a non-electric heating system (e.g. grill), make sure there is always a bottle of water available, to avoid any danger.
24. The reverse of the packaging also includes a choking warning in small print which states as follows:
Eat one at a time. For children under 6, cut marshmallows into bite sized pieces.
25. The reverse of the packaging also contains a description of how to make a s'more as follows:
DO YOU WANT S'MORE?
A s'more ("some more") is a traditional campfire treat, very popular in the United States and Canada, consisting of a roasted marshmallow and a piece of chocolate sandwiched between two pieces of graham crackers (biscuits). Try some more!
…
29. The appellant is a wholesaler, and sells the Product to UK retailers including Asda, Morrisons, Iceland and The Range. In the period covered by the assessments, the appellant also sold the Product by way of wholesale online and through cash and carry outlets. The Product is available all year round.
30. The appellant sells a large number of other mallow products which are held out for snacking and which are standard rated. Some are seasonally themed for sale at Christmas and Easter. Products which are standard rated include mini marshmallows held out for snacking. These are much smaller than regular marshmallows. The appellant also sells mini marshmallows which are held out for sale as a baking product, including use as a cake decoration, which it has zero rated.
31. We were provided with evidence as to the seasonality of the appellant's sales of mallow products, excluding those which are seasonally themed. On the basis of that evidence, we find that sales of all types of mallows are higher in the period May to October than at other times of the year. However, sales of the Product show a greater percentage rise in this period than sales of other mallow products. In the years 2019 to 2021, 65% of sales of the Product occurred in the period May to October. In relation to other mallow products, 56% of sales occurred in that period. We infer from the evidence as a whole that the Product is more likely to be consumed in warmer months than other mallow products. This is because it is more likely to be purchased in order to be roasted over a flame.
…
33. The Product is typically sold by retailers separately from confectionery and other types of marshmallows. It is generally displayed in the "world foods" section of supermarket aisles, and during the summer months it is generally also displayed in the barbecue section.
34. Mr Foster's evidence was that roasting the product made it more palatable. That is Mr Foster's opinion, but we do not share it. Larger marshmallows are equally palatable whether eaten as a snack or after roasting. However, roasting the marshmallows gives them a different texture and flavour. It is easier to roast a larger marshmallow than a regular size marshmallow. Roasting larger marshmallows also gives a different result in terms of the ratio of crisp outer to soft inner mallow. Regular marshmallows would not be as effective to make a s'more because there would not be sufficient soft inner mallow.
35. If a typical consumer wanted to purchase marshmallows for consumption as a sweet snack, then it is more likely that the consumer would purchase regular marshmallows.
36. Overall, we infer that consumers purchasing the Product are more likely to do so in order to roast the marshmallows over an open flame rather than consume them as a snack without roasting. We cannot say to what extent consumers might go on to use the roasted marshmallow as an ingredient in a s'more, although some consumers will do so.
42. Clearly if the product is not roasted then it will be eaten with the fingers, perhaps having been cut up for children under 6. However, once roasted and cooled, the Product might be either eaten off the stick or with the fingers. In the circumstances of this product, we do not give particular weight to the means of eating.
43. …Both parties were agreed that we should categorise the Product by reference to the viewpoint of a typical consumer and giving the term confectionery its ordinary meaning. In carrying out that exercise we consider it appropriate to give particular weight to the nature of the Product, the way in which the Product is placed in supermarket aisles, the packaging and marketing of the Product and our finding that most consumers purchasing the Product would do so in order to roast the marshmallows.
44. On balance we accept that the Product does not fall to be described as confectionery. The fact that it is sold and purchased as a product specifically for roasting, the marketing on the packaging of the Product which confirms that purpose, the size of the Product which makes it particularly suitable for roasting and the fact that it is positioned in supermarket aisles in the barbecue section during the summer months when most sales are made and otherwise in the world foods section, leads us to that conclusion.
The Upper Tribunal
The Court of Appeal
48. The Upper Tribunal said in paragraph 91 of its decision that the FTT "seemed unable to conclude what method was more usually or more often used to eat the product". I do not read the FTT's decision in that way myself. The FTT explained in paragraph 42 of its decision that it did "not give particular weight to the means of eating". It did not say that it could not reach a conclusion on how "Mega Marshmallows" are usually eaten or, in particular, whether they are "normally eaten with the fingers".
49. In the circumstances, the right course must, I think, be to remit to the FTT the question whether "Mega Marshmallows" are "sweetened prepared food which is normally eaten with the fingers" within the meaning of Note (5). To avoid any risk of being perceived as anchored to the earlier decision, the remittal should, as it seems to me, be to a differently constituted FTT. Further, the hearing should be conducted on the basis of the existing written evidence but with the potential for cross-examination and re-examination of any witness who has given evidence relating to the way in which "Mega Marshmallows" are normally eaten.
54. The FTT concluded that "Mega Marshmallows" are not confectionery as that term is ordinarily understood, principally because they are generally roasted after purchase and before consumption. Mr Watkinson accepts, in the light of that finding, that the first route is not open to HMRC in this court and we have therefore heard no argument about it. Speaking for myself, however, I would not endorse the FTT's conclusion on this issue. It is common ground that an ordinary person would regard ordinary marshmallows as confectionery, and it seems to me that such a person might well consider that it makes no difference that "Mega Marshmallows" are larger than ordinary marshmallows and that they are generally roasted before being eaten.
55. So far as the second route is concerned, it is common ground that "Mega Marshmallows" are a sweetened product. Accordingly the only issue is whether they are normally eaten with the fingers. That is a question of fact on which the FTT has not made a finding.
56. In some cases it will be obvious from the nature of the product whether it is normally eaten with the fingers or in some other way, but that is not the case with this particular product. No doubt "Mega Marshmallows" are sometimes eaten with the fingers and sometimes with a fork or skewer. It is not obvious what kind of evidence might be available – or may have been before the FTT – to prove on the balance of probabilities how they are 'normally' eaten. If there is a difficulty, however, that will be the taxpayer's problem as the burden lies on the taxpayer to prove that the product is not normally eaten with the fingers and therefore falls to be zero-rated.
57. As Lord Justice Newey has said, the case will have to be remitted so that the FTT can either make a finding one way or the other or, if appropriate, say that it is unable to do so.
The case is to be remitted to a freshly constituted First-tier Tribunal (Tax Chamber) tribunal, to consider the question whether "Mega Marshmallows" are "sweetened prepared food which is normally eaten with the fingers" within the meaning of Note (5) to Schedule 8 Part II, Group 1 of the Value Added Tax Act 1994. The remitted hearing is to be conducted on the basis of the existing written evidence, but with the potential for cross-examination and re-examination of any witness who has given evidence relating to the way in which "Mega Marshmallows" are normally eaten.
The hearing of the remitted appeal, evidence and submissions of the parties
Preliminary questions
i. The meaning of the provision
ii. The proper approach to the Issue
iii. Applicable principles where a party relies on the burden of proof to resolve a dispute
(a) The situation in which the court finds itself before it can despatch a disputed issue by resort to the burden of proof has to be exceptional.
(b) Nevertheless the issue does not have to be of any particular type. A legitimate state of agnosticism can logically arise following enquiry into any type of disputed issue. It may be more likely to arise following an enquiry into, for example, the identity of the aggressor in an unwitnessed fight; but it can arise even after an enquiry, aided by good experts, into, for example, the cause of the sinking of a ship.
(c) The exceptional situation which entitles the court to resort to the burden of proof is that, notwithstanding that it has striven to do so, it cannot reasonably make a finding in relation to a disputed issue.
(d) A court which resorts to the burden of proof must ensure that others can discern that it has striven to make a finding in relation to a disputed issue and can understand the reasons why it has concluded that it cannot do so. The parties must be able to discern the court's endeavour and to understand its reasons in order to be able to perceive why they have won and lost. An appellate court must also be able to do so because otherwise it will not be able to accept that the court below was in the exceptional situation of being entitled to resort to the burden of proof.
(e) In a few cases the fact of the endeavour and the reasons for the conclusion will readily be inferred from the circumstances and so there will be no need for the court to demonstrate the endeavour and to explain the reasons in any detail in its judgment. In most cases, however, a more detailed demonstration and explanation in judgment will be necessary.
"When this court in Stephens v Cannon used the word "exceptional" as a seeming qualification for resort by a tribunal to the burden of proof, it meant no more than that such resort is only necessary where on the available evidence, conflicting and/or uncertain and/or falling short of proof, there is nothing left but to conclude that the claimant has not proved his case. The burden of proof remains part of our law and practice -- and a respectable and useful part at that -- where a tribunal cannot on the state of the evidence before it rationally decide one way or the other."
iv. Our approach to the findings of fact made by FTT22
The Issue: Discussion
(1) Roasted on a skewer / stick (collectively skewer) and eaten from the skewer (Way A).
(2) Roasted on a skewer, taken off the skewer after it has sufficiently cooled and eaten with the fingers (Way B).
(3) Roasted on a skewer, inserted in the middle of two biscuits with a piece of chocolate and eaten as a s'more (Way C).
(4) Eaten straight from the pack with the fingers (Way D).
(1) First, it is not the Product itself which is being held and eaten with the fingers, but the biscuits. The evidence presented to FTT22 and thereby to us demonstrates that after roasting, the Product has a caramelised outer skin and is liquid and molten underneath. We agree with FTT22 at [34] that the larger size of the Product over regular marshmallows is better for making s'mores because there is more of the soft inner mallow, which is to say that there is more residual heat from the hot molten liquid inner marshmallow to melt the chocolate in the biscuit sandwich. When eating a s'more, a person does not eat the (largely molten) marshmallow with the fingers; the biscuits are in effect implements by which it is eaten.
(2) An alternative analysis, arriving at the same conclusion, is that when the roasted Product is placed into the chocolate and biscuit sandwich to form a s'more, it is being used as an ingredient in the s'more, and thereafter it is not the Product that it is being eaten, but the s'more. In the same way, take the example of a burger, where tomato ketchup has been put between the beef patty and the bun. The burger is then held by way of the burger bun as it is eaten. We do not consider that this would constitute eating the tomato ketchup per se "with the fingers", rather, it would be eating the burger as a whole with the fingers, which is a different thing.
(1) When roasted, the Product becomes molten liquid underneath the caramelised outer skin.
(2) Consequently, after roasting the Product is not like it is when in its unroasted state, where it can be easily held in the fingers. We infer that when roasted, it would lose sufficient structural rigidity to be easily held in the fingers.
(3) Conversely, there is no such difficulty in eating from the skewer, because the skewer holds the Product in its altered caramelised/molten state, and so this in our judgment is the more likely way to be used.
(4) While it may be the case that after roasting, provided the consumer waited for long enough, the roasted Product might cool sufficiently to gain a greater degree of internal coherence, we think it is less likely that a consumer would wait longer than otherwise necessary to consume the roasted Product in this way, compared to eating directly from the skewer.
(1) As the FTT22 found at [35], if a typical consumer wanted to purchase marshmallows for consumption as a sweet snack, then it is more likely that the consumer would purchase regular marshmallows rather than the Product.
(2) The Product is typically sold by retailers separately from confectionary, in "world foods" section of supermarket aisles and in summer months in the barbecue section, FTT22 [33].
(3) The Product is over double the height of regular marshmallows, FTT22 [19], which is to say that it is much bigger than the size of marshmallows generally sold to consumers in confectionery aisles, and we infer from this that the size of them is therefore much greater than the general preference when eating direct from the bag.
(4) Conversely, the larger size of the Product is precisely what makes it preferable for making s'mores, FTT22 [34].
(5) The packaging of the Product has, in the order of text and in the order of images, read left to right, roasting, s'mores and then, last, "just snacking" / the graphic image of the Product with a bite taken out of it. This order is consistent with the other evidence that eating the Product direct from the packet is the last, or least likely, way in which it would be eaten.
Right to apply for permission to appeal