.png)
.png)
The UK's supermarkets look most likely to benefit from an HMRC rebate, after judges ruled that Pringles are not crisps.
The snack in a tube is, in fact, a cake and therefore zero-rated for VAT purposes, according to the High Court, because it is more dough than potato, and each one is of a uniform shape unlike regular crisps.
Food manufacturer Proctor & Gamble (P&G) successfully argued — via Richard Cordara QC — that its savoury product 'does not taste like a crisp or otherwise behave like one' and consumers understand that Pringles — which are 'designed to melt down on the tongue' — are not crisps.
However, the anticipated millions of pounds that will have to be returned by HMRC are unlikely to benefit P&G.
VAT expert Neil Warren (who favours salt and vinegar Pringles) believes the money will have to be passed on to supermarkets and other retailers. P&G would be unjustly enriched by the taxman's payout because the company will have already charged its customers VAT.
Therefore, said Neil, P&G will have to issue VAT-only credit notes to retailers, who will then submit voluntary disclosures to HMRC.
This in turn would lead to a discussion of a key issue: whether supermarkets et al fixed the price of Pringles to compete with similar products, or whether they charged VAT on the non-crisps (which were first produced in 1964 and are now available in more than 100 countries).
HMRC is considering appealing the High Court decision, and should the department do so it will want to establish whether retailers absorbed the VAT or consumers were charged it.
The P&G case follows an April ruling by the European Court of Justice, which deemed that Marks & Spencer was entitled to a £3.5 million VAT refund because its chocolate teacakes were cakes, not biscuits.
'When it was introduced, VAT was meant to be a simple tax,' said Neil Warren, the Taxation Awards 2008 Tax Writer of the Year, 'but 35 years later it's a shame that the basic principle of what is or isn't food is taking up so much time'.
The Pringles case will do little to affect the way the product is sold or advertised, predicted Stefan Chomka of The Grocer magazine, despite the latest blurring of what are crisps and what are cakes.
He said: 'As far as consumers are concerned, Pringles are crisps, they have always been crisps and they always will be crisps.
Will P&G not exploit the High Court decision in any way?
'It would be great if Pringles were to launch a sweet variety,' said Stefan, 'like, say, chocolate orange flavour'.
