/ Food & Drink, Money

Is the ‘pasty tax’ taking the heat off meatier issues?

Pasty-gate – it’s a phrase that’s been in the mouths of the media ever since last week’s Budget 2012. So, as I ate my lunch yesterday (homemade sandwiches) I decided to find out what all the fuss was about.

As part of the Budget last week, George Osborne said:

‘Hot takeaway food on high streets has been charged VAT for more than twenty years; but some new hot takeaway products in supermarkets are not. We’re publishing our plans today to remove loopholes and anomalies.’

A half-baked tax?

A VAT on hot food was put in place in the 1980s, but freshly baked goods, like pasties and pies, were exempt. This is the ‘loophole’ that George Osborne has now closed.

To put it more simply, all food sold ‘above ambient temperature’ will be charged 20% VAT. This could add 50p to the cost of a pasty – a decision that has eaten into high-street baker Greggs’ share price, for example.

However, politicians and the media have been picking holes in the proposal, one of which is the British weather. In the summer a lukewarm pasty would be below ambient temperature, but in winter this same pasty would be above ambient temperature – in one case it would presumably be taxed, in the other it would not.

The proposal could lead to bakeries selling cold pasties for you to heat up yourself. It could even hypothetically lead to two queues, separated by those willing to pay extra for their lunch to be hot, and those who aren’t.

Don’t make a meal of VAT

Looking at the Revenue and Customs website, the plot thickens. Cakes and biscuits are in the main exempt from VAT as they are deemed apparently a ‘necessity’, but as ever there are exceptions to the rule.

Millionaire’s shortbread is zero-rated for VAT, but if you took out the caramel and just had chocolate-covered shortbread, it would be standard-rated for VAT.

With many families finding their purse strings ever tightening and VAT now at 20%, there’s no doubt that VAT-able goods will impact our purchasing decisions.

But as much as I could argue about the rights or wrongs of taxing hot food, perhaps it’s worth thinking about the bigger picture. Either all VAT anomalies need to be ironed out, or we need to talk about bigger issues.

Let’s get hot on the Budget

The government’s decision to close this loophole could either be seen as a well-intentioned effort to put all hot food sellers on the same footing, or it could be seen as a ‘stealth tax’ on the poor. However, last weeks’ Budget introduced a number of major changes to tax bands, stamp duty, and child benefits, with most people being affected, whatever their income.

With this in mind, I find it hard to understand why there’s been such a focus on ‘pasty-gate’.

So, does ‘pasty-gate’ show that the government is out of touch with real people, or that people (and the media that feeds them) are out of touch with the real hot potatoes of the Budget?


As always, the Conservatives are doing everything to punish the poorest in society for the benefit of the rich!

This reminds me of the time when gramophone records were subject to 8% VAT and record players were subject to a higher tax (25%?). A bit daft.

If I buy a pasty in Greggs, can I get a discount if it is cold? 🙂

That seems to be what has been suggested, as said at the end of this video.

It’s good to see that the government gets involved with down-to-earth, practical issues. 🙂

I cannot believe that they are calling this a loophole, considering the massive real tax loopholes that exist for those with enough funds to hire accountants to exploit them. What are they doing about these?

But you are absolutely right about this masking other much more serious issues.

Just 1 instance of massive demographic changes seemingly aimed at the re-Victorianisation of Britain.

The changes to housing benefit, meaning that the Govt’ from Jan 2012 has reclassified all single people in this country under 35 with no children as young adults, drastically cutting their benefit entitlement. We now have a flood of people between 25 & 35 being made homeless, with absolutely no chance of finding accommodation. This legislation is in direct contravention of EEC age discrimination legislation.

Imagine a 30 yr old squaddie, back from Afghanistan, now sacked by Cameron, seeking aid to find somewhere to live, being told ‘sorry, you are not a man you are a young adult and only entitled to enough benefit to enable you to rent a room in a house share with other youngsters.

What else should we be discussing but are not due to this smokescreen?

Jimboc says:
30 March 2012

Biscuits are non-vat if they contain chocolate like cookies but put chocolate on top and vat is due, your comment is misleading

Hi Jimboc, you’re right, biscuits covered in chocolate are VAT-able. But Erica’s right also with millionaire’s shortbread – this isn’t VAT-able, but shortbread covered in chocolate is (the only difference is one has caramel and the other does not). Just shows how mixed up the current system is. Thanks.

There is a simple way out for shops – only sell cold pasties but have a microwave available for the public to use for free.

I think it’s all about the temperature it is when you leave the shop…

HMRC Notice 709/1

4.6 What happens if I provide a microwave oven for my customers to use?

If you sell food to be taken away for consumption elsewhere, but you make a microwave oven available for your customers to heat up the food, either before or after the till point, you are making a supply of hot food which must be standard-rated. This is the case whether or not you make a charge for the use of the oven.

In fact there is a way round the VAT, but it would not be too popular with customers!

If the premises where the food is sold is heated to around 70 degrees C, the food would not be “above the surrounding temperature” and would therefore fail HMRC’s own definition of “hot” food.

It is surely wrong that buying a hot snack from a takeaway shop attracts VAT while buying it from a supermarket does not.
Any attempt to create ” a level playing field” is to be applauded .

BenJie says:
30 March 2012

The tax regime is out of date. The nutrient profiling system to be introduced by European commission to determine which foods can carry health claims could be adopted by HMRC to determine which foods should be VATable.

Having been born and raised in a Cornish household, I’d have to say that many of the products sold as ‘pasties’ by high street bakers bear little or not relation to the real thing. I have resorted to making my own to get the ‘real thing’ when I’m not in the West Country.

This isn’t a “past tax”, but merely an attempt, albeit a flawed one, to harmonise takeaway food VAT rates. The solution is to lower tax and VAT rates across the board, and specifically, for takeaway snack foods is, yes, to buy them unheated!

VAT on the temperature at which food is served is a complete nonsense that could only have been dreamt up by politicians with no understanding of the real world. If I leave my takeaway food on a plate for 30 minutes, I’ve had to pay a whopping 20% tax on the fish and 20% tax on the chips, all because of something that I no longer have – the thermal energy that was in the food when I left the shop. It’s a hellishly expensive way of heating the home!

Rather than tinker with this stupid rule further, a brave (or just sensible) government would have done what some of the other EU states have – reduce VAT on all catering services to 5%, and provide more employment opportunities in a trade that cannot be offshored.

As the pasties need energy to bake,gas/electricity and VAT is charged on that power.We then let the food cool to avoid the VAT.We take it home,use energy to warm it up again and pay VAT on the power.You just cant loose mr osborne? can you??

George Osborne has apparently backed down on the pasty tax: http://www.telegraph.co.uk/news/politics/9296203/George-Osborne-backs-down-on-pasty-tax.html

‘Pasties and other bakery items will no longer attract Vat if they are “cooling down” after being removed from the oven.’

‘Under the revised proposals, only food which is heated after being taken out of the oven – or sold in bags or containers designed to keep the products hot – will be taxed. Supermarkets selling rotisserie chickens, another target of the tax rise, will still pay the higher taxes, as ministers have targeted the climbdown to benefit smaller shops and bakeries.’