Procter & Gamble UK v Revenue & Customs (including Supplemental Judgment)

For a product to fall within excepted item 5 of Group 1 of Schedule 8 to the VAT Act 1994, it must both be similar to a potato crisp, stick or puff and be made from potato, potato flour or potato starch. The two limbs inform one another and must be construed together.

“Made from” requires more than a merely de minimis potato content. Similarity is assessed contextually by the ordinary reasonable person, taking account of all material factors. A tribunal may make a global assessment and need not assign a hierarchy or numerical weight to each factor.

Procter & Gamble UK appealed from the VAT & Duties Tribunal’s decision of 23 May 2007, which had dismissed its challenge to HMRC’s decision that Regular Pringles were standard-rated. The issue was whether the product fell within excepted item 5 of Group 1 of Schedule 8 to the VAT Act 1994, covering potato crisps, potato sticks, potato puffs and similar products made from potato, potato flour or potato starch.

The Tribunal had found Regular Pringles sufficiently similar to potato crisps and made from potato flour. The appeal concerned the proper construction of “similar products made from” and whether the Tribunal had applied the correct approach to similarity and given adequate reasons.

1. Appeal allowed. Regular Pringles were not products made from potato, potato flour or potato starch within excepted item 5 and were therefore outside the exception.

2. Excepted item 5 contains one composite statutory test. Similarity and “made from” must be considered together. The product must be substantially made from the relevant potato material in a way corresponding to the relationship between that material and the statutory paradigm products.

3. Similarity is assessed in the statutory context and at the correct level of generality by the ordinary reasonable person. Ingredients, taste and appearance are relevant. Manufacture, packaging and marketing matter insofar as they identify the product and its use. The factors are not exhaustive.

4. A tribunal need not grade factors, assign a hierarchy or state the weight attached to each one. It must give sufficient reasons to identify the governing principles and explain the result. The attacks based on inadequate reasons, Edwards v Bairstow, packaging, market products and the reasonable person failed.

5. The supplemental judgment ordered HMRC to pay all costs up to the Tribunal proceedings and 90 per cent of the appeal costs. Time for an Appellant’s notice was extended to 8 August 2008.

• High Court (Chancery Division) — Appeal from the VAT & Duties Tribunal allowed.
• VAT & Duties Tribunal — Appeal against HMRC’s decision that Regular Pringles were standard-rated dismissed.