FORGET THE REDUCTION in the top rate of income tax or the cut in corporation tax – the real hot topic in the Budget was a proposed “pasty tax”.
Pasties and other savouries like sausage rolls could rise in price by 20% after chancellor George Osborne announced plans to add VAT to hot takeaway food from bakeries and supermarkets.
Currently, all hot food carries VAT. However, baked goods escape the tax because they are put on display and cool down.
In the Budget last week the chancellor said he was considering plans for all food sold “above ambient temperature” to carry VAT.
Accountants in the Truro, Cornwall, office of Bishop Fleming have leapt to the Pasty’s defence by launching a social media campaign at what they claim is an unfair tax change.
“Unless a Cornish baker refuses to sell a warm pasty until it has cooled, or keeps his shop at equatorial ambient temperature, the full 20% VAT rate will apply. That would mean having a two-tier pasty-pricing: cheaper ones that have cooled, and price plus 20% for those that are still warmer than the shop temperature”, said Robert Bailey, Bishop Fleming‘s tax director for Cornwall.
The VAT treatment of pasties and other savouries may be surprisingly complicated.
Stephen Coleclough tax partner at PwC, notes that products with freshly baked bread aren’t caught in the VAT net. “Batten down the hatches for the first court case on the legal definition of ‘freshly-baked’,” Coleclough said.