HMRC Tells UK Retailers To Account For VAT On Pringles Sales

by Robin Pilgrim, LawAndTax-News.com, London

01 June 2009

HM Revenue and Customs has issued an alert advising businesses to resume the charging of value-added tax (VAT) on the sale of Pringles snacks following the Court of Appeal’s decision in the Proctor and Gamble case.

“The judgment confirms HMRC’s view that ‘Pringles’ are standard-rated for VAT and always have been,” the department stated in a Revenue and Customs Brief on May 29. “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.”

HMRC says that tax must be accounted for by businesses from the period when they applied zero-rating to Pringles up to the present time.

Although food is generally zero-rated in UK, 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, currently 15%.

Procter & Gamble, the makers of Pringles, appealed to the VAT Tribunal on the grounds that a ‘Pringle’ was not similar to a crisp because it was only 42% potato, and therefore 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 the company's favour, but HMRC appealed to the Court of Appeal which has upheld the Tribunal’s original decision. However, Procter & Gamble could yet appeal this decision in the House of Lords.

HMRC said that retailers may make adjustments to their current VAT returns, but the value of the errors must not exceed the greater of either GBP10,000 or 1% of the value of sales declared, subject to an upper limit of GBP50,000. Where the errors exceed these limits, retailers must submit a written notification detailing the error to HMRC. In these cases, the errors must not be corrected through the use of VAT returns, the department advised.

Furthermore, HMRC announced that any claims for overpaid VAT lodged as a result of the High Court decision “will now be rejected."

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