From the Jaffa Cakes decision, which confirmed that chocolate‑covered sponge is legally cake rather than a biscuit, to the Tunnock’s Snowballs case, where marshmallow‑filled chocolate spheres were held to qualify as cakes, courts have repeatedly been required to draw fine distinctions between everyday foodstuffs. The latest entry in this line of authority is Innovative Bites Ltd v HMRC, a case that ultimately turned on how marshmallows are eaten.
Innovative Bites Ltd imported and sold “Mega Marshmallows”, unusually large marshmallows marketed primarily for roasting over open fires and barbecues to make s’mores. In 2019, HMRC assessed the company for almost £473,000 in VAT, asserting that the product was confectionery and therefore standard‑rated. Under Schedule 8 of the Value Added Tax Act 1994, confectionery includes “sweetened prepared food which is normally eaten with the fingers”.
The company appealed. In 2022, the First‑Tier Tribunal found in its favour, adopting a multi‑factorial approach similar to that used in earlier food cases. The tribunal considered the size of the marshmallows, their marketing, shelf placement, and the fact that they were ordinarily cooked before consumption. On that basis, the marshmallows were zero‑rated food rather than confectionery.
HMRC appealed to the Upper Tribunal and in 2024 the appeal was dismissed. The Upper Tribunal confirmed that the First‑Tier Tribunal had been entitled to take a broad view of the product and its use, rather than focusing narrowly on classification labels. Marketing, consumer behaviour and ordinary usage were all relevant considerations.
However, the matter did not end there. In 2025, the Court of Appeal considered the case and took a more restrictive view of the statutory framework. While it did not rule on the VAT status of the marshmallows itself, it held that the tribunals had failed to make a clear finding on whether the product was “normally eaten with the fingers”. The Court of Appeal emphasised that this could be determinative under the legislation. The case was therefore remitted to a newly constituted First‑Tier Tribunal to decide this single issue.
The final decision of the tribunal has recently been published and it has proved decisive. The tribunal interpreted “normally” to mean “more often than not” and approached the evidence accordingly.
The tribunal analysed the different ways in which Mega Marshmallows were consumed: roasted and eaten from skewer (Way A); roasted, cooled and eaten with fingers (Way B); roasted and eaten as a s’more (Way C); and unroasted from packet (Way D). The tribunal held that Ways A and C did not constitute eating with fingers, while Ways B and D did. Crucially, it found Way A more frequent than Way B (because the roasted product becomes molten and is more easily eaten from the skewer) and Way C more frequent than Way D (based on size, packaging, marketing and retail placement).
Consequently, the tribunal concluded that Mega Marshmallows are not “normally eaten with the fingers” and should therefore be zero-rated. As a matter of simple arithmetic, the statutory threshold to be standard rated was not met.
The appeal was therefore allowed. Mega Marshmallows were held not to be confectionery and remained zero‑rated for VAT.
Like Jaffa Cakes and Tunnock’s Snowballs before them, the Innovative Bites case illustrates the peculiar boundaries of UK VAT law. Tax liability may hinge less on ingredients or sweetness than on how consumers customarily eat a product – and, in this instance, on whether a majority reach for a skewer rather than their fingers.
