Government performs U-turn on ‘pasty tax’
The government has watered down its plans to impose VAT on hot take-away food following a public consultation.
Chancellor George Osborne had proposed that from October retailers selling any type of food above ambient temperature would pay 20% VAT on the products. However, the move was widely criticised by both the public and retailers.
Following a public consultation, the government has now decided that pasties and other bakery items will no longer attract VAT if they are cooling down after being removed from the oven. Foods that are kept at a consistently hot temperature such as rotisserie chickens will still be eligible for the tax.
In a statement the Treasury said: “After extensive engagement we have improved the policy, addressing practical concerns, ensuring that the new regime could be as simple as possible to apply.
Never Miss a Retail Update!“We have addressed these in a way that allows us to remove the inconsistent VAT treatment, while not imposing any additional requirement on businesses to test the temperature of their products.”
The decision has been welcomed by organisations representing retailers.
British Retail Consortium director general Stephen Robertson said: “This is good as far it goes. It will spare hard-pressed customers price rises on some products but the Government is still planning to add 20% to the price of things like rotisserie chickens which have previously been exempt. It should not be extending the scope of VAT at all.
“The new proposal will produce less confusion for retailers and enforcers over when VAT is payable. The previous concept of ‘ambient temperature’ was impossible to define legally and unworkable in stores.
“I’m pleased our representations to the Treasury have produced results but this saga shows how vital it is that Government thinks policy through thoroughly and consults early with those who understand the sector rather than springing damaging changes upon us.”
The Association of Convenience Stores chief executive James Lowman said: “Government were right to identify that the current rules on hot food takeaway are confusing and open to inconsistent interpretation,” he said: “Unfortunately we did not believe the measure proposed would have delivered the clarity desired; nor could we support a measure that would have led to an overall increase in the cost of food to consumers.”
Earlier this month bakery retailer Greggs criticised the so-called ‘Pasty Tax’ saying that it could seriously impact sales and profit as savoury sales account for more than a third of its turnover.
