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Who ate all the pies!

‘In attempting to simplify a contentious area of VAT law in his budget last month, the Chancellor seems to have upset quite a number of people’, says Roger Troughton robinson+co’s VAT expert. ‘This is the VAT liability of certain items of hot takeaway food which had hitherto had escaped VAT. It has even been dubbed “the pasty tax”!’ continues Roger.

Since VAT was introduced almost 40 years ago, cold basic foodstuffs have been zero rated for VAT purposes while food sold “in the course of catering” has been standard rated. Since 1984 hot takeaway food, heated for the purpose of being eaten hot, has been treated as being sold in the course of catering even if it was simply handed over a shop counter and taken away by the customer to be eaten off the premises. On the other hand, retailers have successfully argued that Pork Pies and Cornish Pasties, for example, were presented for sale while hot not primarily so that they could be eaten hot, but because it reassured customers they were fresh. Such items – millions of which are sold to hungry workers every lunchtime - have escaped VAT.

That is, until now.

However the Chancellor’s proposal is not straight forward. ‘The definition of hot takeaway food will no longer rest on whether it is intended to be eaten above “ambient air temperature” but simply whether it is above that temperature at the time it is handed to the customer’ says Roger.

So, what are the pie eaters of Britain to do? Carry a thermometer? Refuse to pick up the pie until it has cooled sufficiently to escape liability to the additional 20% tax? Will more pies be taxed on a frosty day than a warm one?

‘As so often happens when something is “simplified”, the changes appear to give rise to a new raft of complications and absurdities and only time will tell whether they will lead to the government’s expected reduction in the number of VAT disputes in this area’ continues Roger.

‘One thing is certain, with the changes expected to extract over £50 million from the already hard pressed consumer in 2012/13 alone, it is not a measure that will be widely welcomed. There is however one crumb of comfort; the changes don’t apply to freshly baked bread!’ finishes Roger.

If you have any queries do not hesitate to contact Roger Troughton on 01900 603623 or email on rogertroughton@robinsonco.co.uk

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