A judge’s decision that marshmallows are not sweets because they may be roasted and consumed off of a stick has resulted in a confectionery company winning a significant tax dispute.
It means one of Britain’s top confectionary firms, Innovative Bites Ltd., can dodge a £470,000 value-added tax bill.
The firm that imports American ‘sweets and treats’ including Twinkies and Reeses into the UK has successfully battled HMRC in a six-figure fight against paying tax on its Baking Buddy Mega Marshmallows.
The company is part of the Leicestershire-based World of Sweets group, which also owns cornershop bagged sweets line Bobby’s and the traditional confectionary brand Bond’s of London.
It beat the taxman in a tribunal in 2022 over a demand for a £472,928 VAT payment, successfully arguing that the giant marshmallows should be zero VAT rated because they are ‘ingredients’ for cooking on a barbecue, rather than sweets.
HMRC was not satisfied with that decision, however, and went on to challenge the ruling in the Upper Tribunal, arguing that the giant marshmallows are still ‘confectionery’ and liable for tax even if they are normally cooked because they are a sweet treat ‘eaten with the fingers’.
However, judges have now ruled in favour of the marshmallow importers a second time, maintaining the decision that the confections are free from taxes as they are frequently consumed roasted off a stick and more packets are sold during the summer grilling season.
Judge Phyllis Ramshaw said: ‘Confectionery is not generally used in cooking, or itself subject to cooking, in order to be enjoyed as intended.’
The Upper Tribunal heard that after being handed a massive tax bill for the period June 2015 to June 2019, the Loughborough-based firm went to a tax tribunal to argue the large marshmallows were in fact ‘ingredients,’ sometimes used for s’mores, an American treat where roasted marshmallows are sandwiched between chocolate biscuits.
Confectionery is subject to VAT, however, goods used for cooking, such as cooking chocolate, may qualify for a zero-rated tax.
The firm’s lawyers said Mega Marshmallows were 5cm in height, compared to 2.5cm for regular marshmallows and intended for roasting rather than eating out of the bag as snacks.
HMRC lawyers argued the Mega Marshmallows could still be eaten ‘on the go’ like a bag of sweets, so should incur VAT.
Mar Bars can also be deep-fried and eaten; therefore, they should be VAT-exempt as well, and Marshmallows are common at BBQs.
Since we already pay taxes on everything we purchase, everything we buy really shouldn’t be subject to further taxes, but our government wants to do so out of sheer avarice.
VAT has not disappeared and never will, so what is our government doing with all of the money that has been pilfered?
Isn’t it great to see the tax man getting beaten, especially when we see the way the governments of today waste our money once they get their hands on it, although I’m not suggesting any criminal acts here.)
THE MONTHLY MOSQUITO 