Following a recent judgment, Walkers, the manufacturer of crisps, finds itself obligated to pay VAT on its mini poppadoms, with the ruling highlighting their connection to crisps rather than traditional poppadoms.
The manufacturer had argued that Sensations Poppadoms should be exempt from sales tax, as they are not crisps, which are subjected to a 20% VAT, including snack foods like chocolate-covered biscuits, and cereal bars, The Guardian reported.
In the intricate landscape of tax regulations, products on this list can incur substantial bills for sellers. Traditional poppadoms, considered restaurant food or requiring further preparation, are zero-rated.
Earlier discussions on VAT have entangled McVitie’s Jaffa Cakes, with tax authorities in the 1990s attempting unsuccessfully to classify them as biscuits. The case of Pringles resulted in a victory for HM Revenue and Customs when they were determined to fall under the crisp category.
Similarly, flapjacks underwent scrutiny, concluding that their chewy nature excluded them from the cake designation, making them subject to VAT.
In 2008, Marks & Spencer won a 12-year battle reclaiming £3.5m in overpaid VAT on chocolate teacakes, with the European court ruling them as cakes, not biscuits.
Walkers argued that its mini poppadoms should not be labelled as crisps since they were not potato-based and required preparation before consumption, designed for dipping in sauces or accompanying a curry.
Despite Walkers' contentions, a tax tribunal asserted that these "small, generally round, bite-sized objects," exhibiting a wavy surface with small bubbles, were essentially crisps.
It was found that a significant 40% of the ingredients are "potato-derived," including potato granules and potato starch, enough to bring them under the tax rule for crisps.
The ruling said that the substantial potato content deemed it reasonable to conclude that the products aligned with the tax rule specifying that a crisp must be "made from the potato … or from potato starch."
The tribunal judges, Anne Fairpo and Sonia Gable, rejected the notion of nominative determinism in snack foods and dismissed the argument that Sensations Poppadoms served a distinct purpose from their larger counterparts.
The judges said, “In practice, we did not consider that they were significantly different to potato crisps with regard to their ability to convey dips etc.
“They are packaged and sold in a manner similar to potato crisps. Removing them from their packaging, we consider that their appearance and texture is similar to potato crisps.” It said that the flavours – Lime & Coriander Chutney and Mango & Red Chilli Chutney – were “not a distinguishing factor.”
Walkers retains the right to appeal the tribunal's decision.
