The law is great because it forces things that should never be in words to be in words.
Last week, judgement was passed down in the case of Walkers Snack Foods Ltd v Commissioners for His Majesty’s Revenue and Customs, with first-tier tribunal judges Anne Fairpo and Sonia Gable ruling against the crisp company. We’ve summarised the nine-page judgement (h/t Katie Martin), which can be read in full here.
The product at stake was Walkers’ Sensations Poppadoms, part of the “oriental crackers and poppadoms” range of potato products created by the company’s “authentic flavours” wing (we’re not sure what no non-Sensation[al] Walkers Ready Salted flavour is if not authentic, but that’s a question for another day).
Sensations Poppadoms come in two flavours — Lime & Coriander Chutney, and Mango & Red Chilli Chutney — between which there is no meaningful legal distinction.
Walkers contended that Sensations Poppadoms should be zero-rated for value-added tax (for which the standard rate in the UK is currently 20 per cent).
Broad Government guidance on VAT says:
Food and drink for human consumption is usually zero-rated but some items are always standard-rated. These include catering, alcoholic drinks, confectionery, crisps and savoury snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks and mineral water.
Naturally, Walkers wanted to be in the first group, not the second. The specific schedule on food at part of the VAT Act of 1994 is here. As the tribunal decision summarised it:
Walkers contend that the products should be zero-rated for VAT purposes on the basis that they fall within Item 1 of Group 1 of Part II to Schedule 8 VAT, being “food of a kind used for human consumption” and that they do not fall within any of the excepted items in that Group. Walkers also contend that the products should be zero-rated under the principle of fiscal neutrality.
Opposing this:
HMRC contend that the products fall within excepted item 5 of Group I, because they are “products [similar to potato crisps, potato sticks, potato puffs] made from the potato, or from potato flour, or from potato starch” and are “packaged for human consumption without further preparation”. HMRC contend that it would breach the principle of fiscal neutrality to treat the products as zero-rated.
Item 5 lays out the zero-rating exemption for:
Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch, and savoury food products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell.
Argument 1: They are not ready for human consumption
A quickly rejected argument made by Walkers was that the products:
were designed to be used with dips, chutneys and pickles, and as a side with a meal. On this basis, they contended that the products required further preparation before consumption and so did not fall within Note 5.
That is to say, Walkers tried to claim that Sensations Poppadoms were, in fact, not a snack by themselves and instead more of a meal component: made whole only by the addition of other products.
This line of argument was quickly dropped after Walkers accepted nothing on the packaging of these products indicated they required additional culinary paraphernalia.
Argument 2: They are not a potato product
Moving swiftly on:
It was agreed that the products were not specifically “potato crisps, potato sticks, potato puffs”; the dispute is as to whether or not the products are “made from the potato, or from potato flour, or from potato starch” and whether they are “similar products”.
Intuitively, most people would reason that settling a dispute over whether a Sensations Poppadom is a product “made from the potato, or from potato flour, or from potato starch” is a fairly simple matter of reading the ingredients list. That attitude is why most people aren’t corporate lawyers.
A detailed breakdown of the ingredient, published as part of the tribunal, sheds light on this point:
Or, more simply:
Walkers:
contended that Note 5 does not include potato granules in determining whether a foodstuff is within scope as it refers only to products “made from the potato, or from potato flour, or from potato starch”. Walkers contended that only these three items should be taken into account. If anything derived from potato was sufficient to bring a product within Note 5 then there would be redundancy in the words used, and so it was submitted that the phrase should be strictly interpreted. On that basis, Walkers submitted that the products should be regarded as being approximately 17% potato for the purposes of VAT. Walkers made no submissions as to why the modified potato starch content should be ignored when considering the potato content of the products.
HMRC, as one might expect, contended that things made from potato are potato — and cited witness evidence that confirmed potato granules are made of potatoes.
The tribunal panel sided with HMRC, finding that the granules should be regarded as existing…
within the term “the potato” for the purposes of Note 5
…and rejecting Walkers’ strict interpretation of the specific potato and sub-potato categorisations within Note 5:
Given the purpose of Note 5 which we consider is clearly intended to catch products with a significant potato-based content which are similar to crisps, sticks and puffs, and in the context of continuing advances in food technology since those terms were included in purchase tax legislation in 1969, it seems to us that it would be inappropriate to limit interpretation in this way.
Argument 3: OK well they don’t *taste* like a potato product
Ontological arguments about potatohood dismissed, Walkers’ lawyers tried another approach:
Walkers contended that the gram flour content should be considered the starting point when considering what the product is made from, submitting that it was the most recognisable ingredient from a taste perspective. They submitted that the word “from” in “made from” could be considered to refer to a focal point rather than the proportion of the ingredient. They compared this to cider being described as made from apples, although the majority content is water.
HMRC, however:
contended that “made from” should be given a natural meaning, and that it was not possible to say that the products were not “made from” potato.
Walkers’ argument is of course a strange one from a marketing perspective — the Sensations website promises snacks with “unforgettable tastes”, which presumably doesn’t mean “gram flour”. The tribunal panel took a similar view (our emphasis):
Although Walkers’ contentions are interesting, we found that the gram flour was not the most recognisable ingredient from a taste perspective and their own witness evidence was that the potato content was included in part to reduce the gram flavour. We considered that the products tasted primarily of the added flavouring and we did not consider that it was possible to distinguish the gram flour from the added flavouring. Obviously the products are not “made from” the added flavouring in any meaningful sense, but equally we cannot conclude from a taste perspective that they are made from gram flour.
Argument 4: They’re not like crisps
Walkers’ next argument was based on the notion of “similarity” — that:
the ordinary person on the street (or as a matter of common sense) would appreciate that poppadoms are not crisps or similar products even if there were factors under closer examination that might indicate similarity. They submitted that the ordinary consumer would not confuse or mistake a potato crisp, stick or puff for one of the products under appeal.
HMRC:
contended that a multifactorial assessment was required, that the term “similar to” needed to be considered into comparison with the specified potato products and not in comparison with non-potato products.
The tribunal panel (who were possibly hungry) agreed with HMRC that it was indeed important to conduct a multi-faceted assessment of Sensations Poppadoms. They wrote:
Walkers’ submissions are interesting but the question of whether traditional poppadoms are, or are not, similar to potato crisps is not relevant to this appeal. The question posed by statute is whether the products which are the subject of this appeal are similar to potato crisps, not whether (or the extent to which) they are similar to anything else. It is not a binary test; a product may be similar to many things but the only similarity that matters in this context is whether it is similar to a potato crisp, stick or puff. We note also that a product might be similar to another foodstuff without being mistaken for that foodstuff – the items do not need to be identical to meet the test in Note 5.
Argument 4a: They’re not like crisps because they’re part of a meal
The tribunal was provided with marketing material that “showed the products being eaten in settings which we consider are not dissimilar to those in which one would expect to find potato crisps”:
for example, being eaten by an individual from a bowl in front of a computer; being shared from a bowl with a takeaway meal, on a table with a notebook and pen, and cutlery, together with what may be a drink in a glass.
We don’t know the exact materials shared, but below are examples of similar material that FTAV found via Google and is reproducing here for the purpose of news reporting:
As part of this “it’s a side, not a snack” argument, Walkers emphasised that Sensations Poppadoms are nowadays available only in sharing bags of the type one might associate with a group meal.
The tribunal panel was not satisfied:
The appellants suggested that this latter example showed the product as being closer to a poppadom, being intended to be eaten with an Indian-style meal. However, the image in question shows an unopened takeaway foil box with a cardboard lid. It is not possible to tell what type of cuisine is involved and we note that potato crisps may also be eaten with a meal.
Argument 4b: They’re not like crisps because they aren’t packaged like crisps
The tribunal panel considered whether the presentation of the Sensations Poppadoms was sufficiently distinct from other products exempted from zero-rating under item 5, such as other potato crisps made by Sensations (the potato crisp-ness of which is not, yet, in dispute).
Analysing the packaging design, they found clear similarities with those other products:
The packaging was consistent with other products in the same range produced by the appellants, including potato crisps. The appellants contended that the font used, which they described as “evocative of Indian text” is different from that used on the potato crisp packaging in that range. It is different but we consider that it does not particularly distinguish the products from the potato crisps in the same range – the overarching brand (“Sensations”) is considerably more prominent on the packaging. The style (a bright image on the left hand side, against a principal colour, with the word Sensations across the packaging and other details in smaller letters) is consistent with the rest of the Sensations range, which includes potato crisps and nuts. As such, we do not consider that the packaging offers any particular distinction to the products.
Argument 4c: They’re not like crisps because they are called poppadoms
Graphic design arguments vanquished, Walkers tried yet another play — arguing now that because they were called “poppadoms” (unlike “potato crisps”, which are called “potato crisps”), the products were not, in common understanding, “from the potato”.
The Tribunal’s verdict (our emphasis):
We consider that this simply means that the word “poppadom” is not a protected term. Nominative determinism is not a characteristic of snack foods: calling a snack food “Hula Hoops” does not mean that one could twirl that product around one’s midriff, nor is “Monster Munch” generally reserved as a food for monsters. For the avoidance of doubt, neither of these has been used as a comparator for the products – we refer only to their names in this context. We do not consider that it is appropriate to give any weight to the name of the products in considering whether the products are similar to potato crisps, given the general freedom (within the constraints of trademark law) for manufacturers to choose the name of their product.
Argument 4d: They’re not like crisps because they don’t look like crisps
Here, via YouTuber Food Review UK, is what Sensations Poppadoms look like:
We admit it’s not a great picture, but copyright law is also wild so it’s the best we can manage. In words:
The products are small, generally round, bite-sized objects. They are somewhat wavy, with small bubbles on the surface. Their colour is a pale yellow/orange depending on the flavour. Considering the comparators provided by the parties, we considered that they were visually similar to the potato crisps (particularly the Sensations balsamic vinegar & caramelised onion flavoured potato crisps), which were generally of a similar size and also somewhat wavy and had bubbled surfaces. The colour of the crisps was also generally similar. We note that colour of potato crisps will also vary with the flavours added; crisps with paprika or similar flavour will generally be more orange/red, for example, and so we do not consider any weight can be given to the colour.
Responding to this, Walkers contended that “that the products were a uniform size (due to the production process) whereas potato crisps varied in size because they were sliced from potatoes”. The Tribunal gave short shrift to this argument:
As already noted, the test is similarity and not identity, and we did not consider that this was a significant difference.
Argument 4e: They’re not like crisps because they don’t work like crisps
Please, please, please, let there be footage of this taking place:
The products were described as being shaped to make it easier to pick up chutney or dips, compared to potato crisps. In practice, we did not consider that they were significantly different to potato crisps with regard to their ability to convey dips etc, particularly given that we consider that there is a practical limit to the amount of dip or chutney that most people are likely to want to combine with the crunch of the conveyor product.
Argument 4f: They’re not like crisps because they don’t do the same things in your mouth that crisps do
There reaches a point where one has to start, at the very least, respecting the creativity of Walkers’ lawyers:
The products tasted principally of the flavouring added to them; there are no unflavoured versions of the products. The appellants argued that the flavours were distinct from the types of flavours which were used for potato crisps but, in a world which contains crisps with flavours as diverse as hedgehog, haggis, sweet chilli, sour cream, and ‘cheese & port’, we are not convinced by the argument that there are any flavours which could be said to be distinct from those used for potato crisps.
(FTAV should note that this appears to refer to “flavours of”, rather than “flavours from”, which is to say that hedgehog crisps contained no hedgehog. We make no comment on the general adjacency of advertised flavour to the products from which their flavourings are derived, and cannot rule out that hedgehog-derived natural flavourings have ever been used in any product.)
Obviously, food generally comes with taste AND texture, although the Tribunal didn’t see a significant bifurcation from potato crisps here:
The products are crunchy at the first bite; they then become somewhat softer thereafter although they did not dissolve completely in the mouth. We did not consider that they were significantly different to comparator potato crisps provided for us to test.
Argument 4g: They’re not like crisps because the public doesn’t think of them like crisps
Thwarted in the taste test, Walkers’ lawyers opted for the vox populi, vox dei approach, presenting a survey carried out by its owner, PepsiCo, regarding Sensations Poppadoms.
The Tribunal panel was unhappy with this presentation, feeling it lacked clear information on both the questions that were asked and the context in which they were asked.
Highlight findings included that 58 per cent of respondents said they would buy “any poppadoms” “instead” of Sensations Poppadoms. The judgement says:
However, this is clearly an incomplete question (presumably instead of the products under appeal, but in what context?), and the answers added up to considerably more than 100% — indeed, the survey results showed that 84% of respondents would apparently buy some form of potato crisp (Sensations crisps, Pringles, Walkers crisps) instead of whatever was being offered to them as an unavailable option.
The second finding presented was similarly unconvincing:
The second survey question asked whether people agreed that the products were poppadoms. It was submitted that 78% agreed that the product was a poppadom. In fact, 32% agreed completely, and 45% agreed somewhat. As already noted, the test that we are asked to apply is not binary. The products may indeed be like poppadoms to a greater or lesser extent, but that does not prevent them from also being similar to potato crisps.
Not really an argument at all: Well if we’re going down, we’re taking other potato poppadoms down with us!!!
At this stage, it appears things got a little bit spiteful:
55. Walkers argued and produced evidence that, in India, poppadoms may be made with potato in some regions. This was in support of their argument that the Tribunal should consider that the use of potato ingredients in these products did not mean that they had to be within Note 5, as poppadoms could have potato ingredients. The evidence that there are recipes for poppadoms in India which include potato products was not disputed.
56. The fact that a poppadom made to a traditional recipe from gram flour without potato is zero-rated for VAT purposes does not mean that a poppadom made to a traditional recipe which includes potato must also be zero-rated for VAT purposes (although it should be noted that we make no findings in that respect, as we were not asked to consider such items). The former is not excluded because it is a “poppadom” but, instead, because it contains no potato.
Argument 5: Fiscal neutrality
With every other argument having been thrown out, Walkers’ lawyers took a more fundamental approach, citing a Court of Justice of the European Union ruling:
that supplies will be treated as similar when they meet the same needs from the point of view of the customer and when the differences between them do not have a significant influence on the decision of the average customer. If goods are the same or similar, competition and distortion of the relevant market can be presumed.
From this perspective, they argued that ‘fiscal neutrality’ should be the framework through which to perceive the plight of the Sensations Poppadom: by slapping VAT on Sensations Poppadoms, but not regular poppadoms, HMRC risked distorting the UK’s poppadom market.
HMRC’s argument at this point was (paraphrased) “but, potato”, which — combined with all of the above — appeared to be enough to satisfy the Tribunal panel at this stage.
Endgame
Dismissing the appeal, the Tribunal panel wrote:
67. The arguments about similarity included comparisons to poppadoms, and reference was made to HMRC guidelines which indicate that poppadoms will be zero-rated. However, the use of the word “poppadom” is something of a red herring (to badly mix foodstuffs). The title given to a foodstuff is not what determines its VAT rating – what matters, in this particular case, is whether it is similar to a potato crisp and is made from potato.
68. Having concluded that the products are made from the potato and potato starch, it is therefore irrelevant whether the products are similar to poppadoms. What matters is whether they are similar to potato crisps. For the reasons set out above, we consider that they are. We find that they are therefore within Note 5 and standard rated for VAT purposes. We also find that there is no breach of fiscal neutrality in treating the products as standard-rated.
Further reading
— Verbatim: What is a photocopier? (YouTube/The New York Times)
