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Mega marshmallows are not confectionery

11 April 2024
Issue: 4932 / Categories: Tax cases
CRC v Innovative Bites Ltd, Upper Tribunal (Tax and Chancery Chamber), 4 April 2024

The taxpayer sold American sweets and treats including large marshmallows called ‘mega marshmallows’. It said the product was designed to be roasted and therefore qualified as a zero-rated cooking product.

HMRC assessed the taxpayer to VAT on the basis that the mega marshmallows were standard rated as an item of confectionery rather than zero rated as a food product. VATA 1994 Sch 8 group 1 covers the zero rating of food but there are exceptions including confectionery. Note 5 of the group confirms that confectionery includes ‘chocolates sweets and biscuits’.

The First-tier Tribunal allowed the taxpayer’s appeal on the basis that the mega marshmallows were sold and bought as a product specifically for roasting. HMRC appealed saying the First-tier Tribunal had erred in law..

The Upper Tribunal disagreed with HMRC. The judges said there was no case law to support HMRC’s argument that simply heating a...

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