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HMRC internal manual

VAT Food

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Excepted items: snack products: potato-based products

The first part of excepted item 5 applies the standard rate to potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch. Apart from the requirement to be made from potato, to be a similar product to those quoted, and to be packaged for consumption without further preparation, there are no other conditions to be met for a product to fall within this part of excepted item 5, and it covers all potato-based snacks.

We interpret the term made from as meaning that potato must be present in the product, even though there may be other ingredients such as wheat. A product will not fall under this heading if potato appears only as a minor addition, for example, to wheat flour: so a biscuit containing a small amount of potato flour would remain zero-rated.

Savoury crisps made from vegetables other than potato are zero-rated.

In the case of Proctor and Gamble (V.18381), the appellant brought before the tribunal a new product, the Pringles Dipper. The new product, looking similar to a typical Pringle, is chiefly made of 39% vegetable oil, 38% potato flour and 16% wheat and corn. The main difference between the two products is that the new Dipper is specifically designed for dipping and accordingly has a scoop shape to be used for dipping the product into accompanying dips.

The tribunal, in ruling that it was a zero-rated product, found that the product:

  • was not packaged for human consumption without further preparation;
  • was not ‘similar’ to other items mentioned in excepted Item 5; and
  • was not made from potato flour within the meaning of excepted Item 5.

Although we disagree with the basis of the decision, Policy were not confident of winning on all three counts which would have been required by the High Court, and therefore did not appeal. We maintain that:

  • a product packaged for human consumption without further preparation means a product sold in a retail pack for eating out of the packet without any need for further preparation by the customer (see VFOOD8040);
  • whether a product is similar to the products named in excepted Item 5 is a matter of impression and a matter for consideration from the perspective of the ordinary informed taxpayer; and
  • made from the potato, or from potato flour, or from potato starch means that potato, or potato flour or potato starch, must be a main ingredient of the product. The fact that another ingredient other than potato may comprise the largest percentage of the total weight of the product will not necessarily determine the matter. If potato is present in the product and it is a similar product to a crisp, then in the light of the Procter & Gamble High Court decision the product will be standard-rated.

In the tribunal of Procter & Gamble (v.20205), the trader appealed against the standard-rated liability applied to their ordinary Pringles product. In dismissing the appeal, the tribunal decided that ordinary Pringles were made partly from the potato, and such was the quantity of potato content that the tribunal considered the product to be made from potato flour, noting:

Here the potato flour content is over 40 per cent; it is the largest single ingredient by about 9 percentage points; and it is nearly three times larger than the other flours in the ingredients taken together. We have to give a yes or no answer to the question ‘are Regular Pringles [partly] made from the potato, from potato flour or from potato starch’ and we are bound to say yes. There are other ingredients but it is made from potato flour in the sense that one cannot say that it is not made from potato flour, and the proportion of potato flour is significant being over 40 per cent. The fact that it is also made from other things does not affect this. Accordingly we find that regular Pringles are made from potato flour…

Procter & Gamble appealed the Tribunal decision and the case was heard in The High Court of Justice Chancery Division [2008] EWHC 1558 (CL), where it was decided that Regular Pringles were not on the facts found made from the potato, or from potato flour, or from potato starch.

Details of the decision are not reproduced in this guidance because, on appeal by HMRC, the High Court decision was subsequently overturned by the Court of Appeal (Civil Division) [2009] EWCA Civ 407.

The Court stated that the statutory question was whether Pringles were similar to potato crisps,potato sticks, potato puffs and made from the potato, or from potato flour, or from potato starch.

It was pointed out that although the question was a composite question and it is convenient to consider the two parts separately, one has to take into account the composite nature of the question. Lord Justice Jacob stated This sort of question - a matter of classification - is not one calling for or justifying over-elaborate, almost mind-numbing legal analysis. It is a short practical question calling for a short practical answer. 

The COA considered whether there was a lower limit below which a Pringle would be deemed not to be made from potato and stated that one did not have to know where a precise line was drawn in order to decide whether something is on one side or the other. The COA confirmed what the Tribunal had said

[17] Here the potato flour content is over 40 per cent; it is the largest single ingredient by about 9 percentage points; and it is nearly three times larger than the other flours in the ingredients taken together. We have to give a yes or no answer to the question ‘are Regular Pringles [partly] made from the potato, from potato flour or from potato starch’ and we are bound to say yes. There are other ingredients but it is made from potato flour in the sense that one cannot say that it is not made from potato flour, and the proportion of potato flour is significant being over 40 per cent. The fact that it is also made from other things does not affect this.

Furthermore the COA stated The Tribunal’s decision in favour of HMRC was not an absolute answer to a pure question of fact or to a pure question of law. It was a judgment of mixed fact and law on the classification of Regular Pringles for VAT purposes. ‘Similar to’ and ‘made from’ are loose textured concepts for the classification of the goods. They are not qualified by words such as ‘wholly’ or ‘substantially’ or ‘partly’ which have crept into the legal arguments. Those words are not in the legislation itself. The Tribunal’s conclusions were on matters of fact and degree linked to comparisons with other goods and related to the composition of the goods themselves.

The final comments made by the COA set out the approach which should be used as an approach to determining the liability of a product. The response to these points is that it is vital to recall why the Tribunal was required in the first place to answer the question whether the goods in question are ‘made from’ the potato. It was not in answer to a scientific or technical question about the composition of Regular Pringles, or in response to a request for a recipe. It was for the purpose of deciding whether the goods are entitiled to zero rating. On this point the VAT legislation uses everyday English words, which ought to be interpreted in a sensible way according to their ordinary and natural meaning. The ‘made from’ question would probably be answered in a more relevant and sensible way by a child consumer of crisps than by a food scientist or a culinary pedant. On another aspect of party food I think that most children, if asked whether jellies with raspberries in them were ‘made from’ jelly, would have the good sense to say ‘Yes’, despite the raspberries.  

The approach taken by the Court of Appeal is that which is to be used to determine the liability of savoury potato snacks.