Yeah, just about everything about it that suggested, honestly, it was intended as an ingredient.

Then again some of the rules surrounding VAT are ludicrous and nonsensical, and that's coming from an American used to insane income tax rules (who, until this year, has thankfully avoided most of the drama, yay for being single and renting).  Seriously, half a million pounds resting on a fine distinction between an Ingredient and a snack.

According to VAT theory, it should be taxed.  When they took sugar and gelatin and boiled it and whipped it and stretched it and formed it into little loaves, they added value, even if it remains an ingredient.  But because assessing value at that level of detail is intricate and highly invasive, instead they put things into broad categories, but not everything fits into those categories very well, and you get into these situations where a marshmallow is not taxed because it's marketed as a s'mores ingredient.  You get that a little with just plain old end-point sales tax too, but the nature of VAT makes it far more common.