| Home > Tax News > Business Tax > Pringles lose at Appeal Court |
| Pringles lose at Appeal Court |
 |
 |
|
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." But a spokesperson for Procter & Gamble said the company had been paying VAT on the snack pending the appeal process, and so would not face the struggle of finding cash for any back taxes. While praising the "simplicity and common sense" of the judges, Toby O'Reilly, director in indirect tax at Ernst & Young, said an opportunity had been missed to provide "coherent guidance" on which snacks are, and which are not, subject to VAT. At last year's High Court hearing, Procter & Gamble insisted that their best-selling product was not similar to potato crisps, because of their "mouth melt" taste, "uniform colour" and "regular shape" which "is not found in nature". It also argued that potato crisps - unlike Pringles - did not contain non-potato flours, and were not packaged in tubes. Pringles are more like a cake or a biscuit, it claimed, because they are manufactured from dough.
|
|||
|
About The Author  Sarah Laing Sarah is a Chartered Tax Adviser. She has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the British Tax Reporter, Taxes - The Weekly Tax News, the Red & Green legislation volumes, Hardman's, International Tax Agreements and many others. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences). Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991. She has worked for both small and Big 5 firms. She now works as a freelance author providing technical writing services for the tax and accountancy profession. |
|||
|
Article Added Thursday, 21 May 2009 | 1661 Hits |
|||
Tax Insider Lite
Each month our tax experts reveal FREE tax strategies to help minimise your taxes. Get Tax Insider Lite:
Tax Books
BOOK OF THE WEEK
Capital Allowances for Fixtures: The New Rules
BOOK OF THE MONTH
A-Z of Plant & Machinery
PROUDLY SUPPORTING
