Walkers VAT Case

Many people have heard of the Jaffa cake VAT case, which concerned whether a jaffa cake was a biscuit or a cake. The importance of the issue was that if it was a cake, then no VAT would need to be charged on the sale, whereas if it was a biscuit standard rate VAT would need to be charged.

Walkers, the crisp manufacturer, has recently been involved in a similar case with HMRC. This case concerned whether the poppadoms it makes, are standard rated or zero rated for VAT.

Basically, the current VAT rules state that if the snack is a potato based snacked, then standard rate VAT is due on the sale of the snack. This means that crisps are subject to standard rate tax, but quavers are not.

The poppadoms conatained approximately 40% potatos and Walkers argued that this did not mean that it was a potato based snack.

The tax tribunal however agreed with HMRC and stated that at 40%,, the poppadomns were a potato based snack and hence subject to VAT at standard rate.

It will be interesting to see if Walkers go away and modify the recipe slightlty to reduce the potato content. The real issue is at what percentage of potato content does a snack become potato based!