Government does U-turn on pasty tax
The Government is to announce U-turns on controversial Budget proposals dubbed the pasty tax and the caravan tax.
Plans to levy VAT at 20 per cent on all hot food had been criticised as taxing lunchtime snacks such as pasties.
But under revised proposals, VAT is expected only to be charged on food intended to be served hot – omitting food such as pasties which is cooked hot but left to cool in cabinets before being served.
Shares in Greggs, the high street bakery chain which warned of job losses if the tax was levied, rose 9 per cent on Tuesday.
Proposals to charge full VAT on static caravans are also expected to be watered down, with the tax being levied at just 5 per cent.
Consultations ended on 18 May and Treasury sources said the change was about implementation and aimed at closing the gaps in the VAT system dealing with unfair anomalies.
Sheryll Murray, Conservative MP for South East Cornwall, said: “I told the government that I didn’t want to see an army of thermometer-wielding tax inspectors poking our pasties and that I was really concerned about the vagaries of ambient temperature. They listened.”
Liberal Democrat MP Stephen Gilbert, who represents Newquay, added: “The Cornish people have won and there will be dancing in streets from Land’s End to the Tamar as people hear that the government has dropped its plans to clobber local people and local businesses with this tax.”
Under the new proposals, VAT will be charged on all food provided hot for the purposes of allowing it to be eaten hot, or food which is cooked hot to order.
VAT will also apply where food is kept hot in hot cabinets, on hot plates, under heat lamps etc, or where heat is applied in order to slow the cooling process.
It will also apply where food is provided in heat-retaining packaging or other packaging specifically designed for hot food – an example would be foil-lined takeaway packaging for Indian and Chinese takeaways.
Food advertised as hot is also subject to VAT.
On static caravans, the 5 per cent rate is being introduced to acknowledge the uncertain boundary between residential and non-residential caravans.
The VAT changes for static caravans will also be delayed from October to April 2013.
