A recent decision in the case of Innovative Bites Limited v The Commissioners for His Majesty’s Revenue and Customs  UKFTT 00352 (TC) reminds us of how the definition of confectionery influences the application of VAT in the United Kingdom.
Innovative Bites Ltd sells large marshmallows, which it believes are sold as cooking products, to distributers such as Morrisons and Asda, which are commonly roasted in an American-style campfire tradition in between biscuits and chocolate, colloquially known as “S’mores”.
This is what Innovative Bites argued in front of the tax tribunal when HM Revenue & Customs (“HMRC”), argued that these marshmallows should fall within the traditional definition of “confectionery” in spite of their size. Confectionary incurs a VAT charge, but if a product is used for cooking it may be zero-rated.
Innovative Bites demonstrated that regular marshmallows are usually 2cm in height with a diameter in height, whereas the product sold by Innovative Bites Ltd are approximately 5cm in height with a diameter between 3.5cm and 4.5cm. Innovative Bites argued that its marshmallows could not be treated as confectionery due to their size. The packaging on its product also outlined the step-by-step process of roasting the marshmallows to turn them into S’mores. Therefore, it argued that its marshmallows ought not to be treated as confectionery and thus not subject to VAT.
HMRC argued that the large marshmallows could be consumed as a regular snack, and therefore fell into the definition of confectionery and as such it should incur a VAT charge.
After considering the evidence, the first-tier tribunal ruled in favour of Innovative Bites and their marshmallows are to be zero rated because they are not considered to be confectionery and, as such, no VAT is chargeable. However, HMRC is carefully considering the judgment, so there could be “S’more” to follow…
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