Innovative Bites has won another round in its long-running VAT battle over giant marshmallows, with the Upper Tribunal upholding a lower court's decision that its Mega Marshmallows are not confectionery and therefore exempt from standard VAT. The tribunal rejected HMRC's appeal, maintaining that the marshmallows, sold specifically for roasting, should be treated as ingredients rather than sweetened prepared foods normally eaten with the fingers. This ruling means the British wholesaler avoids the higher VAT rate applied to confectionery items like regular marshmallows.

The case highlights the complex legal definitions surrounding product classification and tax liability, with implications for other food producers facing similar disputes. £472,928 in disputed VAT remains unpaid pending further proceedings.