Snakes, Ladders... and Marshmallows

The ongoing saga on the VAT liability of giant marshmallows continues. The Court of Appeal has referred the case back to the First Tier Tribunal to consider whether the giant marshmallows are normally eaten by the hand or off a skewer.

If deemed to be a sweetened food normally eaten by the fingers, the large marshmallows will be subject to 20% standard rate VAT. Otherwise, 0% zero-rating applies.

The decision will be very important to Innovative Bites and manufacturers/retailers of the same type of product. HMRC also have a vested interest as the result would cost them tax revenue, and perhaps open the door to other product queries.

In a perfect world, it would probably be best to rewrite the VAT liability of food rules from scratch. With no indication this is happening any time soon, keep an eye out for yet more cases around the VAT rate that applies to food products.

Our team has vast and live experience of helping businesses with the VAT liability of their food products. Contact us if you would like to discuss this with one of our experts.