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What vexing legal question was recently answered by the UK Court of Appeal in a decision handed down on 20 May 2009?
Question
#106025. Asked by jmorrow. (Jun 01 09 9:20 PM)
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Tyger36
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Whether Pringles are potato chips for purposes of the VAT. They are, according to the court, though they only contain 40% potato flour. Proctor and Gamble now owns millions in back taxes.
 http://www.taxationweb.co.uk/tax-news/business-tax/pringles-lose-at-appeal-court.html
Procter & Gamble has lost a legal battle with HMRC over its Pringles snack and will now have to face paying tens of millions of pounds in VAT.
The Court of Appeal has ruled in favour of HMRC, who have long maintained that Pringles are a potato snack and are, therefore, liable for VAT. This overturns the decision of the High Court last summer, in which the Court ruled that the snack was exempt from the tax.
Foods are usually exempt from VAT, but one of the few exceptions is the potato crisp.
In July 2008, the High Court judge ruled that Pringles' packaging, "unnatural shape" and the fact that the potato content is less than 50% meant the snack was exempt from VAT. However, the Court of Appeal judges disagreed with this argument.
Lord Justice Jacob said "There is more than enough potato content for it to be a reasonable view that it is made from potato." - potatoes make up 42% of the Pringles' ingredients.
He added that the lawyer acting for HMRC advised him the VAT due on the sale of Pringles was "as much as £100m of tax for the past and about £20m a year for the future."
[Added reference - McG]
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