Last month, Walkers Snack Foods Ltd failed to convince the Upper Tribunal (the UT) that its Sensations Poppadoms snack should be zero-rated for VAT. The Tribunal concluded the products were "sufficiently potato-based" and too similar to crisps to be anything other than standard-rated.
The "crisp" test was first considered at the First-tier Tax Tribunal ([2024] UKFTT 31 (TC)), where Walkers argued that the poppadom snack should be zero-rated as part of the "food" group and did not fall under the definition of "excepted items" from that group, being:
"…potato crisps, sticks, puffs, and similar products made from the potato or from potato starch..."
The FTT implemented a multi-factorial assessment to decide, concluding that the product contained around 40% potato-based ingredients and was akin to crisps in appearance, texture, marketing, packaging, and use. Differences in flavour, name, or manufacturing did not exclude them from being a crisp.
Walkers appealed that outcome on the basis that the FTT misinterpreted the quantity of potato within the poppadom snack, and failed to weigh other key distinguishing features when applying the test (specifically, the product name and description).
The UT dismissed the appeal, upholding that the 40% "qualifying" potato content was significant, and deemed the FTT's multi-factorial assessment reasonable and lawful. The UT agreed that Sensations Poppadoms are normally enjoyed as a snack, like crisps, rather than as part of a meal, like a traditional poppadom.
The Walkers outcome forms part of the ongoing saga of food products and VAT status, following the recent Court of Appeal decision on large marshmallows (Innovative Bites Limited), where the court applied the test of what an ordinary person would regard as confectionery (another "excepted item"), and whether the product was "normally" eaten with fingers or not.
Sellers should be mindful of the approach adopted in the food and drinks sector, as the "multi-factorial assessment" is heavily fact and product dependent. In Walkers, the Tribunal placed greater importance on the fundamental make-up of the product, in comparison to marketing and packaging. Where what is done "normally" is not obvious, the burden lies with the taxpayer to prove otherwise, which may lead to inconsistent results.
From Jaffa cakes to confectionary and crisps, this will no doubt remain a complex area of statutory interpretation that HMRC has an appetite for, and will by no means be the last.