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Why Pringles have left P&G with a bad taste in the mouth

imagesWhat are Pringles? It turns out this philosophical question is of more than academic interest. The wrong answer will cost their maker, Procter & Gamble, millions of pounds in unpaid taxes.

In my naiveté, I had always assumed that Pringles were a kind of potato crisp, interestingly sculpted and shot through with some flavour enhancer more compulsive to humans than a dose of aniseed slipped to our feline friends during a “blind test” TV cat food ad .

Not so. The potato content is less than 50% and Pringles are apparently manufactured from some kind of dough, which makes them more akin to a cake or biscuit than a crisp.

And the point I’m making is? Well, last year this helpful if perverse interpretation enabled P&G to convince a judge that Pringles are exempt from VAT. Foods are usually exempt, but for some reason potato crisps are not.

Ah, but now it transpires they’re potato crisps after all – according to three Appeal Court judges, who overturned last year’s High Court verdict. Which means that the Revenue will be relieving P&G of up to £100m in back taxes and about £20m a year “going forward” (as they say). Unless this one meanders all the way to the House of Lords…

A tax specialist at Ernst & Young praised the “simplicity and common sense” of the judges but claimed a great opportunity had been lost for providing “coherent guidance” on whether snacks were, or were not, liable for VAT. Quite. My case rests.

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