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Size does matter when it comes to marshmallows | accountingweb
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Size does matter when it comes to marshmallows

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The weird and wonderful world of VAT on food becomes ever more convoluted. This case that shows mega marshmallows can be zero-rated for VAT purposes – unlike their regular-sized counterparts – gave the tribunal something to chew on.

7th Oct 2022
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A client recently said to me that they use marshmallows as a bribe to persuade their kids; the bigger the chore, the bigger the marshmallow. Of course, the tribunal in this brilliantly bonkers case did not consider the “bribability” factor of marshmallows, but nonetheless it offered an interesting analysis of what is confectionery for VAT purposes, and how the size of a product can impact the analysis.

This case focused on the VAT liability of giant marshmallows and whether, unlike regular-sized marshmallows, they can be zero-rated for VAT purposes. 

The taxpayer, Innovative Bites Limited (IBL) is a wholesaler of American treats and sweets and supplied “mega marshmallows”, which are about double the size of a regular marshmallow.

IBL thought that the mega marshmallows should be zero-rated and put forward the following main arguments:

  • The size of the marshmallows means it is easier to roast them on a skewer over an open fire. While the product can be consumed as they are purchased, they would normally be roasted and not used for snacking or eaten with the fingers. 
  • The marshmallows are not confectionery because they are intended to be roasted or used as an ingredient in American campfire treat, s’mores. The packaging of the products holds them out as primarily intended to be roasted, and contains specific instructions for roasting, even though it states that the product is “perfect for roasting, s’mores or just snacking”. 

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Replies (22)

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By Paul Crowley
07th Oct 2022 18:11

This is a disaster
I munch on Frosties as if they are sweets, hands and fingers. How much VAT do I owe?
Would it be better if I poured them into a bowl and eat them with a spoon?
There is no science on VAT and human consumable products. Packaging is the new tax avoidance programme.

Thanks (7)
Replying to Paul Crowley:
the sea otter
By memyself-eye
07th Oct 2022 18:23

Frosties! - you should be more concerned about your teeth than VAT!

Cornflakes with sugar so much better........

Thanks (2)
Replying to memyself-eye:
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By graydjames
10th Oct 2022 10:02

Frosties are Cornflakes covered in sugar.

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Replying to graydjames:
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By BlueNose1812
10th Oct 2022 10:37

Not quite. I think he was inferring that cornflakes covered in gritty granulated sugar are better than cornflakes covered in an icing sugar glaze.

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paddle steamer
By DJKL
08th Oct 2022 13:29

My son a month or so back returned from the USA with mega marshmallows (these were at least 4 times the size of the regular ones, not two times, maybe even six times as large) We ate them in similar manner to the regular ones, just in bites rather than whole, no toasting necessary.

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By Open all hours
08th Oct 2022 19:39

Sorry, but I increasingly see little future for VAT in its present form if we are serious about economic growth, cutting red tape and getting on with what matters. The word ‘if’ is doing an awful lot of lifting in that sentence mind you.

Thanks (2)
Replying to Open all hours:
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By More unearned luck
09th Oct 2022 20:17

Tax disputes are often about boundaries - is your transaction, asset etc on the exempt side or the taxable side? Moving the boundary to a different place won't stop such disputes between taxpayers and HMRC.

Thanks (1)
By SteveHa
08th Oct 2022 22:32

I had a VAT query a few weeks back, on a similar scenario (it was cake, confectionery, or chocolate bar), and so I was particularly interested when I read this. It's a shame we don't get the pictures of the product. That seemed to be all my colleagues were interested in.

Seriously, this is the sort of stuff that makes VAT interesting. remember, VAT is the "simple" tax.

Thanks (4)
Replying to SteveHa:
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By Paul Crowley
09th Oct 2022 16:29

It seems we need not just the item, but the entire wrapper, where it is stocked, and in this case what time of year it sells

Thanks (1)
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By More unearned luck
09th Oct 2022 20:28

This story brings to mind the Stanford Marshmallow experiment.

https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment.

Thanks (0)
Replying to More unearned luck:
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By Hugo Fair
10th Oct 2022 00:19

Although the Tribunal's decision was, arguably, less predictable than the research findings?

Thanks (1)
Ivor Windybottom
By Ivor Windybottom
10th Oct 2022 09:14

The politicians will not risk the electoral fallout from putting standard rate VAT on all food, so we are left with the tax system trying to support the price of basic foodstuffs. Applying VAT and increasing Univeral Credit/NMW is not possible, so long live the craziness of the VAT theme park.

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By North East Accountant
10th Oct 2022 09:57

What a crazy messed up tax system.

Thanks (1)
Replying to North East Accountant:
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By rememberscarborough
13th Oct 2022 10:31

Looking at the news most days it's not just the tax system. Seems the whole world is...

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By graydjames
10th Oct 2022 10:02

Am I the only one here who had to Google "S'mores". Never heard of them.

Thanks (2)
Replying to graydjames:
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By Joe Soap
10th Oct 2022 10:26

No!
I googled it too, and I suggest that you DO NOT because it sounds absolutely disgusting.
Its a sort of instant obesity pill

Thanks (1)
Replying to graydjames:
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By rememberscarborough
13th Oct 2022 10:33

Just come back from visiting relatives in the US. Trying to sort out wi-fi access was "fun" since what they call the pound sign is actually a hash prompt...

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By JamesDS
10th Oct 2022 10:22

And the Office of Tax Simplification rolls in it's grave. Again.

Indeed, this is happening so often that it might be worth harnessing the untapped energy of grave-rolling and perhaps using it to top up our new PM, who appears to be lacking power in the regions directly above her mouth.

Thanks (1)
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By Ian McTernan CTA
10th Oct 2022 11:49

Just shows two things:

1. the VAT system is not fit for purpose and
2. Vat 'experts' are mainly to blame for the increasingly farcical decisions on what is VATable.

Thanks (1)
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By jonnybennett
10th Oct 2022 13:38

I had a dream I’d eaten my pillow and when I woke up my oversized marshmallow had disappeared.

Thanks (4)
By ireallyshouldknowthisbut
11th Oct 2022 13:19

I actually like the logic of this.

Utterly barmy, but logical. Sort of.

They now need a new rule about exactly what size of marshmallows are standard rated, and what are not, and a new inspectorate measuring them.

For the record my kids eat the bigish ones, never toasted.

Thanks (0)
Replying to ireallyshouldknowthisbut:
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By rememberscarborough
13th Oct 2022 10:35

No dafter than whether food has to be heated or not when charging VAT I suppose...

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