Warning to UK snack manufacturers as tribunal confirms VAT treatment of mini poppadoms

Bryn Reynolds and Neil Black of Pinsent Masons were commenting after the Upper Tribunal upheld the First-tier Tribunal’s (FTT) decision confirming that Walkers’ Sensations Poppadoms fall within the scope of “expected item 5” under the Value Added Tax Act 1994. Under the Act, certain products, such as potato crisps and similar snacks, are excluded from the 0% VAT rate typically applied to food.

Reynolds, a tax expert, said: “This is the latest in what is becoming a long series of cases about the very fine dividing lines in the treatment of food products within the UK VAT system. As this is now an Upper Tribunal decision, it has precedential value and would be applied to other disputes about this exclusion from zero rating for food.”

The case (17 pages/331 KB) centred on whether Sensations Poppadoms are “made from the potato, or from potato flour, or from potato starch” and whether they are “similar” to potato crips. Walkers argued that the product, which is made from a blend of potato flour, corn flour, wheat starch, and rice flour, should not be classified as a potato-based snack and therefore should be zero rated. HMRC considered instead that it should be standard rated because it fell within the exclusion for potato crisps and similar products.

Both the FTT and now the Upper Tribunal agreed with HMRC. The judges concluded that the product’s composition and characteristics placed it squarely within the category of snacks intended to be standard rated under VAT law.

In their ruling, the judges emphasised that classification of products requires “composite” and “multifactorial” assessment. This includes examining the ingredients, manufacturing process, appearance, taste, and how the product is marketed at consumers. The Upper Tribunal said that the FTT multi-factorial assessment was appropriate and should therefore not be disturbed. The tribunal found that despite the presence of other flours, the potato content in the mini poppadoms – 39-40% - was significant enough to bring it within the scope of the legislation.

While the Upper Tribunal largely agreed with the FTT decision, there were some reservations expressed about particular elements of the assessment – for example, the approach to names given to products. However, these were not considered material.

Black, a manufacturing law expert, said: “This ruling may prompt a reassessment of product innovation pipelines. Fast-moving consumer goods (FMCG) brands should consider how formulation, packaging and marketing choices influence tax treatment, as these factors can materially affect both pricing strategy and margin performance.”

He added: “An additional 20% on a product's price is likely to materially affect supply contracts.”