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Osborne relents over pasty tax

Following weeks of protests the coalition government has climbed down on two VAT measures announced in the Budget, including the ‘pasty tax’ and a new charge on static caravans.

29th May 2012
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Osborne relents over VAT 'pasty tax' plan
iStock_Cornish pasty_Fudio

The Chancellor wrote to Andrew Tyrie, the chairman of the Treasury Select Committee, to confirm the climb down and alter the definition of a "hot" pasty.

This will allow the VAT reversal on food that is “cooling down”, such as pasties and sausage rolls, after being removed from the oven.

Had the original measure gone ahead, it would have added 50p to a £2.50 savoury food item and raised £110m for the Treasury.

The government also announced that a 20% VAT charge due to be levied on static caravans will now drop to 5% from April next year.

Labour was quick to condemn the way the government dealt with the planned VAT rises, with shadow chief secretary to the Treasury, Rachel Reeves, describing the policy U-turn as a "a total and utter shambles".

The government said it had improved the policies after engaging with concerns, altering the definition of what is a "hot" pasty, and said it showed it was listening.

The original debate was sparked in late March when tax experts in the Truro office of Bishop Fleming picked up on the item in the Budget statement.

Many AccountingWEB members pointed out that the proposals were too complex as it would be hard to define “ambient temperature”.

Bakery chain Greggs also mounted a campaign after £30m was wiped off its market capitalisation following the announcement.

At the time Greggs said the move would have a "disproportionate impact on the specialist bakery sector, resulting in further unemployment, high street closures and reduced investment".

Shares in the company rose 8% in early trading on Tuesday on the news of the U-turn.

George Bull, senior tax partner at Baker Tilly said: “We welcome common sense prevailing on the headline-grabbing pasty and caravan taxes.

“However, this could mean that the UK faces a further VAT increase later this year. With income tax and National Insurance, VAT is one of the “Big Three” revenue-raisers for the UK Exchequer. With no upper limit on the standard rate of VAT, the autumn Budget may announce an increase to the current rate of 20%, as recommended by the IMF.”

In his blog Richard Murphy put the news into perspective: “It’s a good question whether or not he should have done; the pasty tax was a fix for an anomaly exploited by bigger businesses alone whilst the caravan tax was a charge on holiday accommodation. Should it have been VAT free? Neither question is in the big scheme of things that important except for what they represented.”

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By justsotax
29th May 2012 13:00

In my early days

a boss told me about the 7P's....Proper Planning and Preparation Prevents Pi$$ Poor Performance.

 

Clearly something they don't teach at Eaton (and indeed it seems not something he has picked up in his various 'second' jobs, apparently to help him understand what 'normal' people/businesses have to contend with).

 

(Of course the above could probably apply to the vast majoirty of the joke acts we call MPs....perhaps ITV should commission an X factor style audition system for Mps...and we get to vote by phone.....can't do any worse surely!?)

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By esimps
29th May 2012 14:15

I'm pleased to see this decision reversed. This was going to be an extremely awkward tax to administer and didn't make a lot of sense from the start. To me it is the Government trying to raise additional taxes from what many people see as a staple food produce.

Emma // cheap accountant

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By M Shapland
29th May 2012 17:19

Pastry tax

OK the U-turn is great news and I am pleased for the people concerned but in my view the impact this would have had on the general public will have been far less than the attack and claw back of child benefit ...

 

Who is complaining about this? I saw in the news earlier that it had gone through the select committed without a hitch..

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Quack
By Constantly Confused
30th May 2012 09:13

Actual statement

Where would one go to see the actual official announcement?  Have they just dropped it all together (so the current rules will apply for the moment) or have they just replaced the changes with less contencious ones?

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Replying to pacta:
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By Mike Truman
30th May 2012 11:35

Nowhere...

We spent yesterday trying to get something more concrete out of the government for Taxation. HMRC sent us to the Treasury, the Treasury didn't come back to us until the afternoon, and eventually sent a copy of the letter to Andrew Tyrie referred to by Robert above and an anodyne comment. They have decided that VAT will not be charged if food is left to cool down naturally, not kept hot, but they don't seem to have decided any more than that in a form which is fit for public consumption (either hot or cold...).

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By daveforbes
30th May 2012 10:22

the change

The change reported in the Times this morning is that now that pasties will be classed as "hot takeaway food" if they are sold from a heated cabinet rather than being based on their actual temperature.

The whole thing was about making things consistent so hot pasties would be subject to the same VAT rules as say hot takeaway baked potatoes (or any other hot takeaway food).

There has been less coverage on the reversal of the change in VAT on touring caravans. Normal touring caravans are subject to VAT but touring caravans over 7.5 metres long were taxed like static caravans (i.e. exempt). This loophole had to be closed. Who on earth has a touring caravan over 7.5 metres long ? Ah. Retaliation for Dale Farm perhaps ?

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By ACDWebb
30th May 2012 11:34

Roll on a volte face

on the unworkable High Income Child Benefit charge!!

Time for an e-petition?

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By mydoghasfleas
30th May 2012 12:33

More advice I cannot charge for

I was going to write to clients and advise them to buy their hot pasties before this measure came in.  There goes another earner.

I suppose we should be saying, "that takes the biscuit" but as there will now be no VAT, should it not be, "that takes the cake"?

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Replying to Tornado:
Quack
By Constantly Confused
30th May 2012 12:40

.

mydoghasfleas wrote:

I was going to write to clients and advise them to buy their hot pasties before this measure came in.  There goes another earner.

I suppose we should be saying, "that takes the biscuit" but as there will now be no VAT, should it not be, "that takes the cake"?

Depends if it's chocolate covered ;)

 

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By mydoghasfleas
30th May 2012 13:21

Have you noticed on the tax comments...........

........... there are a large number of posts and by a relatively small group of individuals?  So here's a tribute to you all; you know who you are -

From this day to the ending of the world,
But we in it shall be remember'd;
We few, we happy few, we band of brothers (and sisters);
For (s)he to-day that sheds her/his bile with me
Shall be my sibling; be (s)he ne'er so vile,
This day shall gentle her/his condition:
And gentlemen in England now a-bed
Shall think themselves accursed they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day*.

* OK I know it's not until 25th October but these days, I feel grateful if I can hold a thought at all let alone 5 months.

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By Steve-EBL
30th May 2012 13:47

New tax regime

I have thought up a new tax regime that allows all other taxes to be disposed off:

 

1) Paper & Coin money is stopped, only debit cards or electronic transfers allowed to transfer funds from bank account to bank account.

2) Every entity has to have two statutory types of bank account, a capital and revenue account

3) The revenue bank accounts monthly income is skimmed a set % by the government, the rate only altering say if the entity is flesh and blood or corporate.

 

It only took me 5 minutes mind you, whilst I was eating my Pasty, so there might be flaws?

 

 

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Nigel Harris
By Nigel Harris
30th May 2012 15:28

Uh?

I have just arrived back in the UK from a few days abroad, having avoided UK newspapers while I was away. Local TV gave us all the doom and gloom about Syria, Israel's threat to attack Iran and the demise of the Euro zone.

I get back to Heathrow and find the Times front page trumpeting the u-turn on the pasty tax.

I have to assume that either nothing has happened in the UK recently, or - and I fear more likely - the Government PR machine is happy for the news to be dominated by nonsense like pasty taxes while more drastic stuff is quietly implemented unnoticed! Have they buried all the bad news?

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