P&G claim that Pringles 'not a crisp' takes VAT-man's cake

What's the difference between a crisp and a cake? About £100m, if you're Procter & Gamble.

Last Updated: 06 Nov 2012

That’s the estimated amount of VAT that the US FMCG giant is liable for now that its Pringles snack has been officially declared a crisp for tax purposes. What’s more, it's facing an ongoing VAT bill of around £20m annually. That’s no small potatoes.

The verdict – handed down by the Appeals Court – is an abrupt reversal of a High Court judgement from last summer, which agreed with the manufacturer’s claim that Pringles lacked 'potato-ness’, were largely un-crisp-like, and that because of the flour content, they were more akin to a cake.

Hang on a minute. Pringles are cakes? Surely even Heston 'snail porridge' Blumenthal would struggle with that idea. They certainly don’t pass the birthday party test: you’d never get the candles or the icing to stay put, and as for the taste...

Nor can we be the only ones who find it faintly ridiculous that so many fine legal minds should devote so much time to such a question. Who cares whether it's only got 42% potato content, or that it's made from a dough rather than a sliced-up spud? Surely it’s obvious that a Pringle is a crisp, or at least more like a crisp than any other major ‘snack food category’?

But of course common sense goes out of the window when such huge sums of money are involved, and in this case it’s all because of a rather odd exception in the tax rules. Now the VAT code is famously byzantine, giving even Capital Gains Tax a pretty good run for its money in terms of legal minutiae for the lawyers to get their teeth into. Remember the freshly squeezed orange juice debate of a few years ago?

This time the hoohah has been whipped up because, for reasons which nobody seems quite sure about, food products generally are exempt from VAT, but crisps and potato snacks are not. Perhaps the VAT-man thinks that as they aren’t good for us, we should all be eating fewer of them. A fair point, but surely the same could also be said of biscuits, which are VAT-able? The whole thing is enough to make you want to go and nibble on a carrot.

The only crumb of good news for P&G is that it has apparently continued to pay VAT while the case has been pending. So although it won’t now be getting a refund, at least it won’t have to find £100m to hand over to HMRC. That really would have been a credit crunch.

In today's bulletin:

CBI tags Gordon Brown as an economic vandal
Unhappy Birthdays for Clinton Cards
P&G claim that Pringles 'not a crisp' takes VAT-man's cake
Poor people skills destroy merger values
Trader's boozy bet results in two-year FSA ban

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