Revenue & Customs v Proctor & Gamble UK

On an appeal on a point of law from a specialist tribunal, an appellate court must not re-evaluate a classification judgment merely because it would have assessed the facts differently. It may intervene only for legal error, including an untenable construction, a plain misapplication of law, perversity, or inadequate reasons.

Under Item 5 of Schedule 8 to the VAT Act 1994, whether a product is a similar potato product is a composite, practical question. Similarity is assessed overall, having regard to relevant features. A product need not be made wholly or substantially wholly from potato or potato flour. A significant proportion of potato flour may suffice, without fixing a universal minimum percentage.

The Commissioners appealed against Warren J’s decision, [2008] EWHC 1558 (Ch), allowing Procter & Gamble UK’s appeal from the VAT and Duties Tribunal.

The Tribunal had held that Regular Pringles were standard-rated under Item 5 of Schedule 8, Group 1 to the VAT Act 1994. It found that the product was sufficiently similar to potato crisps and was made from potato flour, which constituted more than 40% of the finished product. Warren J held that the statutory requirement was not met and that the product was zero-rated.

The central issue was whether the Tribunal had erred in law in classifying Regular Pringles as similar products made from potato, potato flour, or potato starch.

1. Appeal allowed. The court restored the VAT and Duties Tribunal’s decision. The issue on a further appeal was not whether the appellate court agreed with the Tribunal’s classification, but whether the Tribunal was legally entitled to reach it.

2. The statutory words in Item 5 of Schedule 8 to the VAT Act 1994 posed a composite classification question. The Tribunal was entitled to assess similarity overall by considering appearance, taste, ingredients, manufacture, marketing and packaging. It was not required to assign a separate weight to every feature. Potato content was an obviously relevant factor in considering whether the product was a similar potato product.

3. The phrase made from the potato, potato flour or potato starch did not require a product to be made wholly, substantially wholly, or to the same potato content as a potato crisp. It excluded snacks made from other vegetables or cereals, but did not impose a fixed percentage threshold. The Tribunal was entitled to find that a product containing more than 40% potato flour, its largest ingredient, was made from potato flour.

4. The Tribunal’s evaluative conclusions were not perverse and disclosed adequate reasons. Its decision told the parties why they had won or lost and enabled a court to identify any question of law. The High Court had therefore erred by substituting its own construction and assessment.

5. The Tribunal was also entitled to decline the contrary approach adopted in Pringles Dippers (2003) VAT Decision 18381. Coordinate tribunals are not bound by stare decisis, although they should ordinarily seek consistency and depart only when convinced that an earlier decision is wrong in law.

• Court of Appeal (Civil Division): Allowed HMRC’s appeal and restored the Tribunal’s standard-rating decision: [2009] EWCA Civ 407.
• High Court, Chancery Division: Warren J allowed P&G’s appeal from the VAT and Duties Tribunal and held that Regular Pringles were zero-rated: [2008] EWHC 1558 (Ch).
• VAT and Duties Tribunal: Held that Regular Pringles fell within Item 5 of Schedule 8, Group 1 to the VAT Act 1994 and were standard-rated.