Managing directors of two highly-regarded companies that offer take-out food have criticised the Government’s ‘pasty tax’ u-turn, calling it “spineless” for not tackling the VAT “loophole” and saying it will further complicate the tax system.
The Government has backed down from plans to add VAT to all hot takeaway food. The tax will not now be charged on products such as pasties that are taken from the oven and left to cool. VAT would still be charged on food that’s kept warm after heating, such as rotisserie chicken in supermarkets.
Martin Dewey, managing director of gourmet pie shop chain Square Pie, told M&C Report that the rules on VAT “are already clearly set up to levy VAT on hot food” and companies such as bakery chain Gregg’s have been using “a legal loophole through a clever interpretation of the word ‘ambient’ to avoid tax”.
He said the proposed change in March’s Budget was “sensible and fair and I hoped a small step on the way to a simpler, fairer vat system whereby foodservice/restaurant food had a single rate of VAT as in Australia”.
“Sadly it highlights the spineless and PR-driven nature of the Government and what the country really needs is strong government to create the conditions to drive growth. If they cannot even stand up to a well-organised pasty lobby, which is exploiting a loophole, how are they going to get the banks lending to businesses?”
Brandon Stephens, managing director of Tortilla, the Mexican fast-casual dining chain, said: “The original proposal from the Government would have removed some of the disparity and resulting competitive disadvantages that arise from the current set of unclear and complicated rules.
“But in backtracking the Government has generated even more exceptions and carve outs, further complicating a poorly thought-through set of legislature.”
He added: “The use of temperature - hot versus cold - as a mechanism to designate what is a ‘service’ (and therefore ‘VAT-able’) is poorly thought through. How is the preparation and assembly of salads, sushi and sandwiches (to say nothing of pasties) not a service?
“The basic bottom line is that a 20% discrepancy in pricing between competing products due to illogical VAT rules is simply outrageous.”
Meanwhile, JD Wetherspoon chairman Tim Martin has backed the view that the u-turn offers some hope of a VAT cut on food served in pubs and restaurants.
“What it shows is that it can be done. We’ve got a cast iron case and Greggs and others have shown it can work,” Martin told M&C Report.
Martin called for the industry to be “more self critical” over its lobbying, saying: “We haven’t been as effective as supermarkets and the food industry.”
