Appeal judges decide Pringles are potato crisps

Three judges at the Court of Appeal were asked to decide whether Pringles are similar to potato crisps and made from the potato - and therefore liable for Value Added Tax.

A VAT Tribunal decided they were, a High Court judge said they were not.

The appeal judges have now reinstated the tribunal decision, leaving Procter and Gamble, makers of the snack, liable for £100 million of past VAT and £20 million a year in the future.

But a spokesperson for Procter and Gamble said the company had an agreement with HMRC while the appeal was pending and continued to pay VAT on the product and so there were no back taxes to pay.

Food products are usually zero-rated for VAT, but one of the exceptions is the humble potato crisp.

The VAT Act 1994 singles out the snack for tax purposes with the words:

"Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs and similar products made from the potato, or from potato flour, or from potato starch, and savoury products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell."

During the hearing of the case last month, Roderick Cordara QC argued that the product should have a sufficient content of potato to give it a quality of what he called "potatoness".

He said Regular Pringles, which contain 42 per cent potato, 33 per cent fat and flour cannot be said to be "made from potato".

But the appeal judges disagreed.

Lord Justice Jacob said the VAT Tribunal was right to find Pringles are sufficiently similar to potato crisps to bring them into the tax net.

He said he could not agree with Mr Justice Warren in the High Court who found that the potato content of Pringles should be disregarded when considering the question of similarity to crisps.

"There is more than enough potato content for it to be a reasonable view that it is made from potato," said Lord Justice Jacob.

The spokesman for Procter and Gamble said: "We are disappointed with the court's conclusion that VAT should be applied to Pringles.

"We have always asserted that Pringles in the UK market should be taxed as all other savoury snacks with which it competes. We remain committed to providing consumers with high quality, tasty snacks."

Lord Justice Jacob said in the Court of Appeal ruling that the case involved "rather a lot of money".

He said Christopher Vajda QC, for the HMRC, had told him it was "as much as £100 million of tax for the past and about £20 million a year for the future".

An HMRC spokesman said: "We are very pleased with the Court of Appeal's decision which very strongly supports the view that HMRC has always held on the VAT liability of this product.

"We will be issuing a Revenue & Customs Brief confirming that Regular Pringles are standard-rated and advising on how any unpaid VAT should be accounted for."