The Pasty Tax, What is it and Does it Affect Me?Tags: Pasty, Pasty Tax
The 'Pasty Tax', you can't turn over the TV without hearing about it at the moment. But just what exactly is it and how does it affect you? We read an interesting article in 'The Guardian' which gives you the low down;
David Cameron claims to love them; George Osborne can't remember the last one he had. The food in question? The humble pasty – propelled to the forefront of the national consciousness thanks to one of the chancellor's more obscure budget proposals. The introduction of 20% VAT on pasties, rotisserie chickens and other hot food sold by bakeries and supermarkets - trending on Twitter, inevitably, as the "pasty tax" -has been met with anger across the UK.
So what would the tax change mean to the average hungry pasty-lover? Existing rules governing takeaway food, and the proposed changes, are brain-numbing in their complexity. But to summarise, food is subject to VAT once it is heated to "above air-ambient temperature", and meant to be eaten in or near the shop or restaurant. So "takeaway food" is already subject to VAT, while most hot food sold by bakers and supermarkets is exempt as it has been heated to improve its appearance (ie it could equally be enjoyed cold); or it will be eaten at home.
The aim of the change is therefore to "clarify the definition of 'hot takeaway food' to confirm that all food (with the exception of freshly baked bread) that is above ambient temperature when provided to the customer is standard [VAT]-rated". Having admitted he last enjoyed a pasty at the West Cornwall Pasty Company in Leeds station (that shop closed in 2007), Cameron asserted that since VAT had been added to hot takeaway food 20 years ago, we had had "a number of businesses trying to find ways around that rule, fighting court cases and the rest of it".
There are fears that the price of the average pasty could rise by around 50p, high-street baker Greggs has seen millions wiped off its share price, andis considering legal action if the proposal isn't scrapped, and on Tuesday, Labour MP John Mann evoked the warm weather to point out other difficulties. "With the weather as it is today," he told the Commons Treasury Committee, "a lukewarm pasty from Greggs is not VAT-able because the ambient temperature outside is the reference point, whereas if it is the middle of winter and freezing cold, it is. It's an extraordinarily complex situation when you are having to check with the Meteorological Office on whether or not to add VAT on pasties."
It's not only the weather that makes the proposals confusing, but also an attempt to define what constitutes bread. "Freshly baked bread that is cooling down in the racks" is to remain VAT-exempt, but there's an obvious issue around establishing which other types of bread to include – the HMRC is currently seeking clarification from retailers.
A spokesman for Morrisons says this makes the situation almost comical. "Will a slice of hot pizza count as bread? ... Will they send round a load of government inspectors with probes to stick up rotisserie chickens in every Morrisons oven-fresh section?"
In Cornwall, the backlash is gathering pace. St Ives MP Andrew George told the House of Commons last week that "we will be fighting them on the beaches" in opposing the change; and Alex Folkes, Liberal Democrat councillor for Launceston Central, has organised a Facebook campaign, Stop the Pasty Tax, which already has 5,000 members. "I'm not saying that the tax means nobody will ever buy a pasty again," he says. "It would mean some people buying hot pasties less often – and that could lead to job losses."
Tracey Alston, finance director at the West Cornwall Pasty Company, agrees. "If we passed on the resulting price rise to customers, our medium pasty would go up from £3.40 to £4.50. In these economic times, we just can't do that to people."
From the pasty shop she has run in Helston for more than 25 years, Ann Muller sounds a similarly warning. "This is basically a tax on the working man of Britain," she says, "and on the many elderly and unemployed people who come by here for a pasty every lunchtime.
"My hot pasties would go up by 50p from £2.75: for some people, that will make a big difference. I'm planning to put a sign up in the window: 'Hot for the rich, and cold for the poor.'"
Source: The Guardian