Most food in the UK is exempt from the tax, but crisps are not. The Pringles case has been to court three times, with the VAT and Duties Tribunal pitted against US snack maker and owner of the Pringles brand Procter & Gamble.
To be subject to VAT, a snack product "must be wholly, or substantially wholly, made from the potato", according to the definition set out in the 1994 VAT Act.
Last year, a judge ruled that Pringles were not "made from the potato" – but the Court of Appeal judges ruled on Wednesday that Pringles contain “more than enough potato content” to be considered a crisp, at about 42 per cent.
Procter & Gamble had insisted that Pringles’ packaging as well as their regular shape and uniform colour “not found in nature” distinguished them from potato crisps.
Company spokesperson Claire Forsyth-Brown told BakeryandSnacks.com that Procter & Gamble does not face an outstanding VAT bill because pending a final decision it chose to continue paying the tax.
“We are obviously disappointed with the current decision…but we have always paid VAT on Pringles and for us this is business as usual,” she said.
If Procter & Gamble wishes to take the case further, it must now directly approach the House of Lords, but Forsyth-Brown said the decision was still with the company’s lawyers.
Other UK potato crisp brands subject to VAT include Walker's, Wotsits and Hula Hoops, while those in the VAT-free camp include Doritos, Mini Cheddars and Wheat Crunchies, Twiglets and tortilla chips.
The complexities behind the UK's VAT system for foodstuffs were also in evidence last year in a case that saw the European Court of Justice (ECJ) ruling that the UK Treasury had incorrectly imposed VAT on teacakes from UK retailer Marks and Spencer – ending a 12 year dispute.
The UK Treasury faced a bill of more than £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 the product as 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 and biscuits.