As the national political debate around the Budget moves on, one specific proposal is continuing to dominate both the headlines and my inbox – the so called ‘Pasty Tax’. The Chancellor’s proposals to change the VAT arrangements on hot food could see the tax being levied on pasties for the first time. The Treasury are currently consulting on the idea, and there remain some uncertainties that will need to be clarified.
I certainly understand the logic behind making sure that VAT is charged on hot food in places like large supermarkets to stop them undercutting local cafés and takeaways. But aside from the inevitable pasty puns in the press, there is serious concern across Cornwall.
The pasty industry is a major employer across the Duchy and these proposals could have an inadvertent impact on jobs at traditional bakeries and specialist pasty-makers if the tax drives consumers away from the Cornish staple.
The Cornish Pasty has this Protected Geographical Indication (PGI) status – in the same was Camembert cheese and Champagne do – ensuring that only authentic pasties produced in Cornwall can be called Cornish. Along with my Cornish Liberal Democrat colleagues in the Commons I have signed a motion calling on the Government to look at exempting those foods which have significantly advanced PGI status in Europe.
That would mean that the pasty – which is a key part of our regional culture – can be protected. Treasury ministers have agreed to meet with me and a delegation from the Cornish Pasty Association to discuss the government’s plans and to look at protecting the humble pasty, and the Cornish economy, from any unintentional damage by these half-baked plans.
* Dan Rogerson is the Liberal Democrat MP for North Cornwall.
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14 Comments
My local supermarket sells hot chicken which will be subject to VAT, and cold pasties which will not. It is the pasties which are receiving favourable treatment.
Just what we need: another exemption and inconsistency.
I don’t mind people campaigning for it, but I don’t think cafes should be tax-exempt even if they serve pasties.
The pasty industry is a major employer across the Duchy ….
The oil industry is a major employer across the country … lets not tax oil, oetrol, plastics, ….
The electronics industry is a major employer across the country … lets not tax TVs, computers, phones, ….
The building industry is a maj …..
My husband and I bought two Levi Roots pie at a service station. They came from the chilled cabinet and were cold. My husband paid for the pies and then we heated them in the microwave provided. Does this mean that the pies were tax exempt?
At my local supermarket, I often ask for the warm pasties and sausage rolls as they are wheeled out rather than choose the cold ones that are in the cabinet. Will I now have to pay tax for my choice?
I just find this whole warm/cold pasty tax confusing and complex.
Hot pasties have been subject to VAT since at least 1994. The wording in the 1994 VAT Act is very specific in saying hot pies are subject to VAT but bread is not.
The problem is that some bakers have been avoiding the tax by pretending that pasties are bread instead of pies.
Osborne has not created a pasty tax, he has cracked down on tax avoidance.
These companies claim back VAT on their input costs, so are in effect getting a subsidy from the tax payer.
Worse, just look at who is running the bakers. The same guy who helped destroy Northern Rock is now working at Greggs and they are using gullable left wing politicians to promote tax evasion to enrich themselves. Greggs made over 50 million in profits. They can afford to pay the VAT without putting up prices or cutting staff.
More here: http://bit.ly/H1VavJ
nonny mouse
they are using gullable left wing politicians to promote tax evasion
I would say “opportunistic” rather than “gullible”, and “left wing” only by comparison with the far-right (in economic terms) Conservatives.
I am sure even Labour MPs have the brains to see that this is not really a “pasty tax”, simply a clarification of the rules on the taxation of hot takeaway food to make sure whichever shop it is bought from it is taxed the same. It seems to be obvious – if the food is produced and kept in a way intended for it to be eaten shortly after purchasing while still hot, if we are to have VAT on hot takeaways it should have VAT charged on it. The idea that if it is sold from a supermarket or bakery it doesn’t get taxed but if sold from a cafe it does makes little sense. It seems to me very easy to see when food sold from a bakery or supermarket is sold in a way that means it is intended to be eaten soon afterwards while still hot. If it’s an attack on poor people to clarify the tax situation in this way, well then, it is just as much an attack to tax takeaway food from cafes, fish-and-chip shops and the like – so let Labour propose the abolition of such tax, and how they will make up the money lost – or better, stop faffing around and acting childishly and if they really do have a coherent alternative economic policy, tell us what it is.
The fact that this is the main thing Labour, in alliance with the right-wing press, could come out with in response to the budget, along with an entirely mythical “granny tax” (hint – why are higher tax allowances as a way of supporting the elderly regressive – anyone with an ounce of left wing sense cold answer that one) indicates they are intellectually bankrupt. They have nothing significant to say. Opportunistic knocking of any simplification of taxes is just playing to the right-wing game that all tax is evil.
While I doubt that you will carry the day, Dan… thank you for gallantly following in the likely footsteps of Cornish miners of yore, who would be marching on the halls of Westminster should a like tax have been imposed on their traditionally taken hot from the oven and enjoyed on the job cold Cornish pasties…
Lib Dems need to pick their in-Government battles wisely – the Pasty tax certainly wouldn’t be a wise choice.
But you’re Cornish MP, so fair enough.
Lets think about it for a minute;
The pasty contributes half a billion pounds to the Cornish Economy,
The Cornish Economy has been on EU aid (objective one, then convergence, and recently become the recipient again), This makes Cornwall poorer than Romania.
The wealth disparity in some parts of Cornwall is immense. In Truro, the average price of a house is 10x that of the average income (so we earn 18k a year, house prices around the city are on average 175k)
The pasty is an icon of Cornwall.
The average price of a pasty here is £2.50
Now add 20% onto that price, it hits £3. That’s more expensive than a M&S sandwich, a meal deal at subway, and at boots. So people will stop buying them. This would have a detrimental effect on the pasty industry and therefore Cornwall, making it a more impoverished duchy.
The pasty tax must be stopped. Otherwise there are people in Cornwall who will fall further down the poverty trap.
Tom Stubbs, your logic seems impeccably wrong.
Do Cornish people eat 200 million pasties a year? If they stop eating them, that 500 million will go on buying something else, there will be an employment boom in the non-pasty sector, and the people who used to work in pasty selling shops will be re-employed in the food outlets that the customers move to. Furthermore, the food sold in those food outlets will have to come from somewhere, including from Cornwall. So Cornwall would not lose anything like half a billion pounds.
In fact, cornish pasties are not interchangeable goods with other foods. If there is less than a 50p difference between pasties and other snacks, it’s far more likely that people will continue to choose on the basis of what they like, not on price. It therefore seems likely that the tax wll not affect pasty demand very much at all.
So the pasty industry probably won’t be affected in anything like the way you say, What is undoubtedly the case is that the tax will exit Cornwall. If that is 50p on each pasty, it makes 100 million a year. Still a significant amount, but that is only if all the pasties are eaten in Cornwall. If most of the pasties are exported, say to supermarkets throughout the country, it might end up as a relatively trivial loss to Cornwall, and well made up by the EU assistence which it receives and which therefore represents Cornwall profiting from losses from somewhere else in the EU..
If a pasty is made in Cornwall and shipped off, then surely it becomes cold and so is not subject to VAT. If it is made in the spot and served hot, so subject to VAT, it is not a Cornish pasty unless it is bought in Cornwall.
This discussion is daft, can we perhaps have some sensible talk about what is really being proposed rather than sensationalist nonsense because someone chose to dub it “pasty tax” rather than “patty tax”? Had it been dubbed the latter, which in my part of London would be just as relevant, we would have outraged Jamaicans complaining it was an attack on their culture.
There is some confusion in this thread on VAT etc. If an “input” is subject to VAT then the business pays that VAT but can reclaim it (assuming it is registered for VAT) and if the output is subject to VAT then it is charged on the output and so on along the chain the tax is essentially charged on the value added – and so that the tax is not paid many times over but only on the value added at each stage. If you have vatable inputs at £10, you pay 20% VAT to your supplier but can reclaim it and then charge £11 to an individual – there is 20p in total VAT extra at that point – not £2.20 – so there is a total tax of £2.20 not of £4.20.
A classic example is for printing: VAT is paid on the inputs (but reclaimed by a VAT registered business) – ink and paper but there is no VAT on printed material – leaflets, magazines, books etc. so it does not have to charge VAT when it sells the printed material. A vat registered business thus pays less for its inputs than a non VAT registered individual. That’s why political parties often set up printing societies etc.
In the case of firms making pasties then there would be no VAT on most of the inputs as they would be food and no VAT on the output as it was cold food. If a restaurant then takes that cold pasty and heats it up, it then has to charge VAT. The penalty for the pasty makers is that it costs more and fewer pasties will be therefore be sold. VAT is also obviously particularly tried to be avoided etc. if it suddenly becomes due at a point along the chain.
To answer the question above if a shop sells a product and makes available a microwave etc. for a customer to heat up a product then it should charge VAT on that product but I suspect it doesn’t in practice if it is a shop with a wide range of goods.
Essentially a food product is subject to VAT if it is hot or if it is hot or cold and sold for consumption on the premises i.e. in restaurant. Cold take-away food is not subject to VAT. It used to be that hot take away food was not subject to VAT – Macdonalds for example had an eat-in and a take-away price but this was changed in the 80s.
Greggs etc. are saying that their “hot” products are like a loaf of bread which is baked and is warm when it comes out of the oven and then cools down. And the VAT guidance does specifically say at the moment that if it is warm/hot just because it has been freshly cooked and is not kept warm or cooked to order etc. then it is not considered hot.
While I appreciate that this is put in terms of big business and small businesses VAT obviously draws no such distinction but it has to be said that Greggs have found a clever model because of their size, marketing and turnover to essentially sell hot food without having to pay the VAT on hot food.
For clarity some food is subject to VAT – e.g. confectionery, most drinks etc. (I remember being charged an extra penny for my mars bar when the Tories put up VAT in 79!)
There is more on the VAT guidance for catering and take-away food at http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000160&propertyType=document#P138_14405
[Enough VAT – ed]
For clarity the protected status of a product such a cornish pasty is where it is MADE not where it is bought.
And there was I – hoping to get some new ideas based on how Cornwall Lib Dems were campaigning to save the Cornish Party!