UK: Are Pringles Crisps? The Court Of Appeal Decides...

Last Updated: 29 May 2009
Article by Peter Mason and Gregory Price

On 20 May, the Court of Appeal handed down its judgment on one of the most vexed legal questions of our time: are Pringles crisps?

The answer, or at least as far as the Court of Appeal is concerned, is yes. Good news for the taxman, who can continue to charge VAT on the sale of Pringles. Bad news for those who can't stop once they've popped.

Crisps are an exception to the general rule that VAT is not charged on food (known as zero-rating). So it matters whether your manufactured savoury snack product is in fact a crisp.

This is, however, not a case where Procter & Gamble, who manufacture Pringles, would have been exposed to anything by way of back taxes - in fact, Procter & Gamble were in line for a tax rebate of up to Ł100m if HM Revenue & Customs' view that Pringles are crisps was found to be incorrect.

The crisps category for VAT includes products that are similar to potato crisps and made from the potato. Pringles only contain around 40% potato. How should we decide whether that amounts to a product made from potato and similar to crisps?

Pringles' advocate, arguing for zero-rating, claimed that Pringles do not have the necessary quality of "potatoness". The Court rejected this idea ("an Aristotelian question"), and asked instead whether a reasonable man on the street would conclude that Pringles are similar to crisps and made from potato. Unfortunately for those who like their savoury snacks cut into saddle shapes, the answer is yes.

Despite detailed legal arguments about the fact that Pringles contain ingredients other than potato, one judge thought the answer to the crisps question was really very simple: "most children, if asked whether jellies with raspberries in them were 'made from' jelly, would have the good sense to say 'Yes', despite the raspberries."

But things are never completely straightforward in the world of VAT. The infamous Marks & Spencer chocolate teacakes litigation (result: they're cakes not biscuits) ran for more than ten years. So this may not be the end of the debate about crisps. This latest decision in fact reverses a finding by the High Court (which did not think that Pringles were crisps), and does not affect the Pringles Dippers variety, which are not treated as crisps.

For manufacturers, it is clearly a concern that a product's profitability can be affected by the complex VAT rules that apply to food. For some, the actual design of their snacks might be influenced by posing the all-important question: when is a crisp not a crisp?

Case reference: HMRC v Procter & Gamble UK [2009] EWCA Civ 407

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 29/05/2009.

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