After a year-long effort to protect the sanctity of its mini poppadoms, it is now crunch time for Walkers after a British First Tier Tribunal (FTT) ruled the snack brand will have to pay millions in tax every year.
Let’s chip back the covers and ponder the debate.
The finitude of definitions
It started in June 2021 when the HM Revenue and Customs (HMRC) stated Walkers’ Sensations Poppadoms should be charged the standard snack tax rate.
According to HMRC, they are ‘products made from the potato or from potato flour or from potato starch’ – similar to potato crisps, sticks or puffs – and are ‘packaged for human consumption without further preparation’.
Walkers disagreed, arguing the nibbles are not the same as potato crisps and therefore shouldn’t be classified as a snack. Rather it’s a ‘modernized’ version of a popular Indian staple, typically eaten with a meal or with additions like chutney or dips – therefore requiring preparation.
For the law’s purposes, ‘food’ requires preparation and is intended to be eaten as part of something bigger. ‘Snacks’ can be enjoyed on their own.
It may sound like a trivial distinction, but the motivation to clarify this was to save hefty annual value added tax (VAT) fees. Where most food items are tax-exempt in the UK, the current VAT rate for snacks is 20%.
Walkers is not alone in debating the finitude of definitions.
HMRC lost the 1990s debate that McVitie’s Jaffa Cakes were biscuits, not cakes. Conversely, in 2008, Marks & Spencer claimed back £3.5m in overpaid VAT after a 12-year battle that its chocolate teacakes were cakes, not biscuits. And in 2022, a tribunal ruled that flapjack bars produced by Glanbia Milk are too chewy to be taxed as cakes.
However, HMRC won the great Pringles debate of 2008, which found the ubiquitous canned snacks counted as crisps, despite arguments to the contrary.
And now, following the Pringles decision, the Walkers FTT has ruled the fluffy potato medallions are “similar to potato crisps” and therefore not eligible for zero-rated VAT. This means Walkers will have to pay the same VAT on its poppadoms as it does on its crisps.
Debating the finer points
According to Walkers’ lawyers, the bites – which were launched in the late 1980s – are “closer to a poppadom [the anglicized version of the Indian papadum], being intended to be eaten with an Indian-style meal” and therefore requiring preparation.
However, FTT judges Anne Fairpo and Sonia Gable ruled that “nominative determinism is not a characteristic of snack foods. Calling a snack food Hula Hoops does not mean that one could twirl that product around one’s midriff. Nor is Monster Munch generally reserved as a food for monsters.
“In practice, we did not consider that they were significantly different to potato crisps with regard to their ability to convey dips, etc, particularly given that we consider that there is a practical limit to the amount of dip or chutney that most people are likely to want to combine with the crunch of the conveyor product.
“They are packaged and sold in a manner similar to potato crisps. Removing them from their packaging, we consider that their appearance and texture is similar to potato crisps,” they added.
The world of diverse flavors
Walkers’ counsel also contended the poppadoms came in flavors that are unusual for crisps, such as lime & coriander chutney and mango & red chilli chutney.
In response, the judges said, “In a world that contains crisps with flavors as diverse as hedgehog, haggis, sweet chilli, sour cream, and cheese & port, we are not convinced by the argument that there are any flavours which could be said to be distinct from those used for potato crisps.”
Potato vs gram flour content
Perhaps most critically, the snack producer argued the potato starch and granules used to make the poppadoms, by purist standards, shouldn’t count as potato.
The lawyers also reasoned the poppadoms contain gram (chickpea) flour, which is used to make the traditional Indian product. They noted several non-potato poppadom brands currently found on UK supermarket shelves are VAT-exempt.
Judges Fairpo and Gable opposed the argument, noting that gram flour only made up around 14% of Walkers’ poppadums and while they may not contain as much potato as potato crisps, they “obviously contain potato”. In fact, 40% of the product is made from potato ingredients, including 17.5-18% potato granules, 17.5-18% potato starch and 4.25% modified potato starch.
“The fact that a poppadom made to a traditional recipe from gram flour without potato is zero-rated for VAT purposes does not mean that a poppadom made to a traditional recipe, which includes potato, must also be zero-rated. The former is not excluded because it is a ‘poppadom’ but, instead, because it contains no potato,” they said.
“Having concluded that the products are made from the potato and potato starch, it is therefore irrelevant whether the products are similar to poppadoms. What matters is whether they are similar to potato crisps.”
The FTT judges ruled the “small, generally round, bite-sized objects” are crisps in all but name.
Walkers has eight weeks to appeal.
