Tax appeal by Walkers regarding Sensations Poppadoms dismissed by tribunal
Upper Tax Tribunal Rejects Walkers' Appeal over VAT Dispute with HMRC
In the UK, a long-running dispute between Walkers Snack Foods and the tax authorities over the value-added tax (VAT) status of its Sensations Poppadoms has ended with the Upper Tax Tribunal dismissing the company's appeal.
The subsidiary of American food giant PepsiCo claimed that its 'Sensations Poppadoms' should be treated as zero-rated for VAT purposes, falling under group one of VAT definitions. However, HMRC disagreed, arguing that the product, made from potatoes and packaged for human consumption, should be subjected to the standard rate of 20% VAT.
Initially, the case was brought before the First-Tier Tribunal. Judge Anne Fairpo carefully examined two flavors, Lime and Coriander Chutney, and Mango and Red Chilli Chutney, and found the Sensations Poppadoms contained a significant amount of potato granules, potato starch, and modified potato starch, leading her to rule in January 2024 that these snacks are not eligible for zero-rated VAT.
Walkers attempted to appeal this decision to the Upper Tax Tribunal, but two judges dismissed the appeal on Friday. VAT partner at MHA, Robin Prince, explained that the Upper Tribunal had reservations about the First Tier Tribunal's decision, expressing concerns that it did not consider the product's name in its ruling. However, the Upper Tribunal ultimately concluded that the First Tier Tribunal had not made an unreasonable decision.
Background information reveals that, according to current VAT rules, savory snacks like crisps and Sensations Poppadoms fall under the standard rate of 20% VAT. This classification is important for businesses to ensure compliance with VAT regulations and to avoid costly errors. Despite discussions and studies about reforming VAT on food to promote healthier diets and reduce environmental impact, no such changes have been implemented to date.
Businesses like Walkers, a subsidiary of PepsiCo, must adhere to the standard VAT rate of 20% when it comes to their products, as defined by HMRC. This follows the Upper Tax Tribunal's rejection of Walkers' appeal over the VAT dispute with HMRC, relating to the zero-rated VAT status of their Sensations Poppadoms.
