Procter & Gamble has lost a legal battle to prove its Pringles brand is not a potato crisp, in a failed bid to avoid paying an estimated £20m in VAT a year.
Despite protestations that Pringle is made out of 33% fat and flour and only 42% potato, the Court of Appeal has ruled in favour of HM Customs and Revenue.
Most food products are exempt from VAT, but potato snacks are one of the few exceptions.
A P&G spokesman says it does not owe any back taxes “as VAT has continued to be applied to the Pringles brand throughout the course of these considerations”. It is believed however that if it had not been paying the VAT, it could have been hit with a bill of £100m in back payments.
The spokesman says it is now “reviewing the decision and will consider our options for an appeal”.
The decision follows a ruling made last July by a High Court judge who found that Pringles’ packaging, unnatural shape and the fact that it contains less than 50% potato content, meant that it could be exempt from VAT.
But in the Court of Appeal Lord Justice Jacob says there is enough potato content “for it to be a reasonable view that it is made from potato”.
Speculation has surrounded P&G’s plans for Pringles in the past but the manufacturer has stated that the brand is one of its core products.
The brand has been extended in a bid to gain healthier credentials with the Pringles Rice Infusions offering.