It’s crunch time for Walkers after a ruling that the company must pay VAT on its mini poppadoms because they are really more like crisps.
The manufacturer had argued that the sales tax should not apply to its bags of Sensations Poppadoms as they were not crisps – which are on a special list of snack foods subject to the levy alongside ice-cream, chocolate-covered biscuits and cereal bars.
Under the complex tax rules, foods on that list attract 20% VAT, which can mean a multimillion-pound bill for sellers. Traditional poppadoms are zero-rated as they are deemed to be a restaurant food or one that requires further preparation rather than a packaged snack.
Previous VAT debates have involved McVitie’s Jaffa Cakes, which tax authorities in the 1990s unsuccessfully argued were biscuits; Pringles, a win for HM Revenue and Customs when they were found to be a crisp; and flapjacks, which were found to be too chewy to be a cake and therefore subject to VAT.
In 2008, Marks & Spencer claimed back £3.5m in overpaid VAT on its chocolate teacakes after a 12-year battle that ended in Europe’s highest court ruling they were cakes and not a biscuit.
Walkers argued its mini poppadoms should not be classed as a crisp as they were not made from potato and required preparation before consumption, as they were designed for dipping in sauces or to have alongside a curry.
However, a tax tribunal found that the “small, generally round, bite-sized objects”, which were “somewhat wavy, with small bubbles on the surface”, were crisps in all but name as 40% of the ingredients were “potato-derived” including potato granules and potato starch.
The ruling said this was “more than enough potato content for it to be reasonable to conclude” that the products fell within the tax rule that stipulate a crisp was “made from the potato … or from potato starch”.
The tribunal judges, Anne Fairpo and Sonia Gable, added: “Nominative determinism is not a characteristic of snack foods: calling a snack food Hula Hoops does not mean that one could twirl that product around one’s midriff, nor is Monster Munch generally reserved as a food for monsters.”
They were also unconvinced by the suggestion that Sensations Poppadoms were used in the same way as their larger brethren. “In practice, we did not consider that they were significantly different to potato crisps with regard to their ability to convey dips etc, particularly given that we consider that there is a practical limit to the amount of dip or chutney that most people are likely to want to combine with the crunch of the conveyor product.
“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 had not responded to a request for comment by the time of publication. However, the company does have the right to appeal against the tribunal decision.
