Walkers’ Sensations Poppadoms – are they subject to VAT?

Walkers’ Sensations Poppadoms ruled to be subject to VAT at the standard rate in recent Tribunal decision

What’s the issue?

Although food is generally zero rated for VAT purposes, there are several exceptions. Within these exceptions are potato crisps, which are standard rated and 20% VAT is payable. The guidance clarifies that potato crisps should be packaged for human consumption, without further preparation, and made from potato crisps, sticks, puffs, and similar products.

In a case held at the First-Tier Tribunal, Walkers argued that their Sensations Poppadoms should be zero rated, as they were made from potato granules, therefore not falling within HMRC’s definition. HMRC disputed this claim, with the view that the product was made using around 40% potato products, including potato granules and starch. Although not listed explicitly in their definition, HMRC argued that potato granules and starch are made of dehydrated potato and the regulation therefore applies. The proof is in the potato, it seems.

Why is this important?

The result of this case will have significant implications for manufacturers in the snack food industry, with similar products on the market now possibly subject to the standard rate. There are some key takeaways which may be relevant for future product analysis:

• Walkers’ argument that the products were designed to be used with dips was dismissed, as this was not stated on the product packaging. This highlights that businesses cannot securely rely on certain conditions of the legislation if their product packaging does not support their argument. Promotional material was also assessed, which ultimately suggested that no preparation was required to enjoy the product.
• HMRC was successful with their argument that the product was “made from the potato”, despite the product having only 40% potato-based ingredients. This shows that a product does not need to have a majority of potato-based ingredients, as with potato crisps, but that a significant proportion will suffice.
• HMRC disregard Walkers’ argument that the product is more similar to traditional poppadoms, which are zero-rated, than to potato crisps. In response, it was argued that the product’s similarity to other products is irrelevant; the only similarity that matters in this context is its similarity to a potato crisp.
• The Tribunal drew on the concept of nominative determinism in response to Walkers argument that the products are called “poppadoms”, not potato crisps. They argue that simply by naming the product “poppadoms” does not change the fact that it is ultimately a potato crisp. With a highly memorable line, it was put forward that “calling a snack food “Hula Hoops” does not mean that one could twirl that product around one’s midriff”.

This decision sheds light on the relevance of fiscal neutrality, supporting the principle that similar products should have a similar VAT treatment to ensure fair market conditions.

As the discussions surrounding snack foods and VAT continue to roll on, we anticipate that HMRC may consider revisions to the legislation to reduce the scope for dispute and confusion. In light of this, businesses should ensure they continue to monitor the guidance to ensure they remain compliant with any changes.

How can we help?

The Sensations Poppadoms case emphasises the complexity and ever-changing nature of this area of VAT. Businesses selling any potato-based snack foods may require review to confirm the VAT liability. 

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