Proctor & Gamble, the maker of popular snack Pringles, is set to save millions of euros after the UK High Court rules the product is not a crisp.
Revealing the intricacies of VAT rules in relation to modern foodstuffs, the court said that Pringles could be sold tax-free because they do not have enough potato in their formulation.
With only 42 per cent of potato content the snack is neither wholly or exclusively made from potato, and is also made from dough, making them more like a cake or biscuit.
Pringles in all flavours fall outside of the definition for crisps, and therefore are not subject to the 17.5 per cent tax that applies to "potato crisps, potato sticks, potato puffs and similar products made from the potato, or from potato flour, or from potato starch" defined in the 1994 VAT Act.
Justice Nicolas Warren asserted that Pringles also distinguish themselves from crisps through their packaging - the easily recognisable tube - and 'unnatural shape'.
Under VAT rules in the UK most foodstuffs are exempt from VAT: the ruling from Justice Warren follows an appeal by US snack makers Proctor & Gamble against a VAT Tribunal decision that stated Pringles should be standard-rated at 17.5 cent because they fall within the definition for potato crisps.
A spokeswoman for Proctor & Gamble is reported as saying: "We are pleased with this High Court ruling that Pringles should be appropriately categorised for VAT alongside other savoury snacks with which it competes."
UK potato crisp brands subjected to VAT include Walker's,Wotsits and Hula Hoops, while those joining Pringles in the VAT-free camp include Doritos, Mini Cheddars and Wheat Crunchies, Twiglets and tortilla chips.
Further zero-rated VAT snacks are, according to the UK's HM Revenue and Customs office, savoury snacks consisting of sliced and dried or roasted vegetables other than potatoes, for example beetroot and carrot; tortilla chips, corn chips and bagel chips; and roasted pulses and legumes, for example chick peas and lentils.
The complexities behind the UK's VAT system for foodstuffs were also in evidence earlier this year in a case, redolent of Pringles in its intricacy, that saw the European Court of Justice (ECJ) ruling, and ending a 12 year dispute, that the UK Treasury had incorrectly imposed VAT on teacakes from UK retailer Marks and Spencer.
The UK Treasury faced a bill over £3m because customers paid VAT for 20 years on the M&S teacake, treated as a biscuit and therefore open to the VAT levy, before the authorities recognised that the product was a cake, which are zero-rated.
Under UK tax rules, most traditional bakery products such as bread, cakes and Jaffa Cakes are free of VAT, but the tax is payable on cereal bars, shortbread and partly-coated or wholly-coated biscuits.