In Walkers Snack Foods Limited v HMRC [2024] TC09024, the First Tier Tribunal (FTT) found that Walkers ‘Sensations Poppadoms’ are standard rated for VAT. They are made from potato and potato starch, and were similar to potato crisps.
- In June 2021, HMRC issued a decision that ‘Sensations Poppadoms’, produced by Walkers Snack Foods Limited (Walkers) in two flavours, were standard-rated for VAT purposes.
- Note 5 of Group 1, Schedule 8 VATA 1994 provides that VAT standard rating applies to "...potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch...”
- Walkers and HMRC agreed that the products were not 'potato crisps, potato sticks or potato puffs', but HMRC argued that they were ‘similar products’ made from ‘the potato, or from potato flour, or from potato starch’.
- Walkers Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- There was more than enough potato content to conclude that the products were made from potato or potato starch.
- Both flavours contained 17.5-18% potato granules, 17.5- 18% potato starch, and approximately 4.25% modified potato starch.
- While Note 5 does not specifically refer to potato granules, these were made from cooked and dehydrated potatoes and contained whole tissue cells. Potato granules therefore fell within the term ‘the potato’
- With a total of around 40% potato-derived ingredients, the proportion of potato content was significant compared to other ingredients.
- The products were similar to potato crisps. A multifactorial assessment was required: it was a question of whether the products were similar to potato crisps, not whether they were similar to anything else, such as poppadoms. The products:
- Were packaged and sold like potato crisps.
- They were located in the snack food aisle of retailers, with potato crisps and similar snacks.
- Marketing images focussed on the flavours of the products. This was not distinguishable from the advertising of potato crisps.
- They were sold in large ‘sharing’ bags, like potato crisps.
- The packaging was consistent with other products produced by Walkers, including potato crisps.
- Appearance was similar to potato crisps.
- Taste was not a distinguishing factor.
- There are many diverse flavours of crisps meaning that it was hard to conclude that any flavours would be distinct from those used for potato crisps.
- Texture was not significantly different from potato crisps.
- They were crunchy at the first bite and then became somewhat softer thereafter, although did not dissolve completely.
- Ingredients were consistent with potato crisps, with oil being the second main ingredient.
- The argument that the potato content was included to make the product cheaper, something not true of potato crisps, did not give sufficient distinction to outweigh the similarity to potato crisps.
- Were packaged and sold like potato crisps.
- There was no breach of fiscal neutrality in concluding that the products were within Note 5.
The appeal was dismissed.
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