HM Revenue & Customs vs ‘Pringles’

The Court of Appeal issued its decision in this case on 20 May 2009. The judgment is in HM Revenue & Customs (HMRC) favour and confirms that the sale of regular ‘Pringles’ is standard-rated for VAT.

Background

Proctor & Gamble manufacture ‘Pringles’, a savoury snack product, commonly sold in retail outlets.

Although food is generally zero-rated, some items, including potato crisps and similar products made from the potato or from potato flour or from potato starch are excluded from zero-rating and charged with VAT at the standard rate.

Procter & Gamble appealed to the VAT Tribunal on the grounds that a ‘Pringle’ was not similar to a crisp and that it was not wholly or mainly made from a potato product. The Tribunal did not accept this argument and found in favour of HMRC.

Procter & Gamble subsequently appealed to the High Court which found in their favour and decided that regular ‘Pringles’ were eligible for zero-rating because they were not wholly or mainly made from potato.

HMRC appealed to the Court of Appeal which has upheld the Tribunal’s original decision.

Implications of this judgment

The judgment confirms HMRC’s view that ‘Pringles’ are standard-rated for VAT and always have been.

Therefore, any business that chose to stop charging VAT on ‘Pringles’ as a result of the High Court decision must now resume charging VAT on all such sales. Tax must also be accounted for, for the period from when zero-rating was applied to the current date.

An adjustment may be made to your current VAT return, but the value of the errors must not exceed the greater of either £10,000 or 1 per cent of the box 6 figure on the VAT return for the VAT return period of discovery, subject to an upper limit of £50,000.

Where the errors exceed the limits set out above, a written notification detailing the error should be submitted to HMRC (in these cases the errors must not be corrected through the use of VAT returns).

Details of where to send your notification can be obtained from update 2 to VAT Notice 700/45 - How to correct VAT errors and make adjustments or claims from the HM Revenue & Customs National Advice Service on Tel 0845 010 9000.

Any claims for overpaid VAT lodged as a result of the High Court decision will now be rejected.

If you have any queries about this please contact the National Advice Service.

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