30 May 2012

Government announces ‘pasty tax’ U-turn

The Government has announced a U-turn on its controversial ‘pasty tax’.

The measure, which was announced in the 2012 Budget, came under fire from critics who argued that plans to levy VAT at 20% on all hot food would impact on lunchtime snacks such as pasties, pies and sausage rolls.

The so-called ‘pasty tax’ received widespread media coverage in the ensuing weeks, and the Treasury has now confirmed that the plans will be revised following ‘extensive consultation’.

A spokesperson said, ‘We have addressed these [concerns] 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’.

Under the revised plans, food that is provided hot or cooked to order will be liable to the tax, as will food that is advertised as hot, and food that is kept warm or served in heat-retaining packaging.

However, food that is cooked but allowed to return to ‘ambient temperatures’ on shelves, rather than being kept hot, will not be liable for VAT.

Meanwhile, the Government has also announced revisions to its proposals to charge standard rate VAT on static caravans, with a reduced rate of 5% now set to be levied from next April.

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