Greggs, the bakery retailer, has vowed to ‘lead a rebellion’ over the government’s plans to extend VAT to all hot takeaway food. As commentators pointed out that caviar remains zero-rated, the National Association of Master Bakers warned that the reform could force many small bakers’ shops out of business.
Ken McMeikan, Greggs’ Chief Executive, was ‘taken aback and angry’ at the proposal, the Financial Times reported. ‘We will be fighting this all the way,’ he said. ‘At a time when the consumer is under enormous pressure and at a torrid time for the high street, this felt like a tax measure that has been ill thought through and the timing could not be worse.’
HMRC said in a consultation document that the proposed change would clarify the definition of ‘hot takeaway food’ to confirm ‘that all food [except] freshly baked bread that is above ambient air temperature when provided to the customer is standard-rated’. Some retailers had argued that their products were zero-rated under the current rules, HMRC said, on the basis that ‘the purpose of heating [them] is to improve their appearance or to comply with health and safety regulations, rather than to enable them to be consumed hot’.
But Steve Hawkes, Business Editor at The Sun, claimed that ‘George Osborne's new tax on pies was branded even more half-baked as it emerged CAVIAR is exempt’.
‘Upper crust fans of the posh nosh will NOT pay 20% VAT since, unlike baked goods, it will remain zero-rated. That is because it is deemed simply a "food" rather than a luxury like the sausage rolls and pasties Mr Osborne also plans to slap VAT on,’ he wrote. ‘Snack attack ... one in the eye for pies’ was the caption beneath a photograph featuring a steak pie and caviar.
On the eve of the Budget Andrew Sentance, PwC’s Senior Economic Adviser, had observed that ‘at the heart of the taxation of spending’ was a VAT system in which a wide range of items was zero-rated. ‘Can it make sense for caviar to be zero-rated for VAT (as a food) while toothpaste and soap carry the full 20% rate? Narrowing zero-rating to more basic items of expenditure could create greater scope for reductions in personal or corporate tax rates, benefiting the economy as a whole,’ he wrote on a PwC blog.
Greggs saw £30m wiped off its share value last week. ‘The chain bakes products in its stores meaning that they are sometimes sold to customers while still hot, but they are not stored in heated cabinets or marketed as hot snacks,’ the Financial Times said. The Daily Mail reported that ‘the take-away tax will add 18p to the price of a 90p hot sausage roll, 50p to a medium Cornish pasty and £1 to a supermarket rotisserie chicken’.
The National Association of Master Bakers warned that the move ‘could very well see the demise of many more small bakers shops in the High Street’ due to loss of custom. ‘Customers visit their local bakers for pies and savoury product, as opposed to more expensive meats for their main meals, especially during the current economic climate. A 20% increase will cause even more problems for the craft baker and their business,’ it said.
‘Anomalies and loopholes’
Significant anomalies have developed in the VAT system over time, last week’s Budget report said at 1.201-2: ‘These cause very similar products to be taxed very differently ... From 1 October 2012, VAT will be extended to reduce anomalies, including the use of self storage (to align it with other forms of storage) and alterations to listed buildings (to align with the existing VAT treatment of repairs). The government will also close loopholes in the VAT system to prevent avoidance and ensure compliance. From 1 October 2012, VAT will be extended to close loopholes, including by applying it to hairdressers’ chairs (to make clear that their rental is already subject to VAT), static holiday caravans (to bring in line with mobile caravans) and certain hot food (because most hot food is already subject to VAT).’
Catering questions
HMRC invited comments by 4 May. Its questions on catering were summarised as follows:
Does the proposed legislation meet its objective of ensuring that all hot takeaway food is taxed consistently at the standard rate of VAT? If not, why not and what changes are needed?
Freshly baked bread which is cooling down will remain zero-rated. Bread will be defined in guidance. What types of bread are most likely to be baked on a retailer’s premises and are therefore above ambient air temperature at the time they are provided to customers?
Does the proposed legislation meet its objective of ensuring that food courts, tables and chairs outside a café and similar eating areas are included within the definition of premises? If not, why not and what changes are needed?
We have considered impacts on businesses and consumers of the changes to catering [see the Table of Impacts in Annex B]. We would welcome comment on these impacts (including any specific impacts on small businesses) and would particularly welcome details of any impacts we have not identified.
Greggs, the bakery retailer, has vowed to ‘lead a rebellion’ over the government’s plans to extend VAT to all hot takeaway food. As commentators pointed out that caviar remains zero-rated, the National Association of Master Bakers warned that the reform could force many small bakers’ shops out of business.
Ken McMeikan, Greggs’ Chief Executive, was ‘taken aback and angry’ at the proposal, the Financial Times reported. ‘We will be fighting this all the way,’ he said. ‘At a time when the consumer is under enormous pressure and at a torrid time for the high street, this felt like a tax measure that has been ill thought through and the timing could not be worse.’
HMRC said in a consultation document that the proposed change would clarify the definition of ‘hot takeaway food’ to confirm ‘that all food [except] freshly baked bread that is above ambient air temperature when provided to the customer is standard-rated’. Some retailers had argued that their products were zero-rated under the current rules, HMRC said, on the basis that ‘the purpose of heating [them] is to improve their appearance or to comply with health and safety regulations, rather than to enable them to be consumed hot’.
But Steve Hawkes, Business Editor at The Sun, claimed that ‘George Osborne's new tax on pies was branded even more half-baked as it emerged CAVIAR is exempt’.
‘Upper crust fans of the posh nosh will NOT pay 20% VAT since, unlike baked goods, it will remain zero-rated. That is because it is deemed simply a "food" rather than a luxury like the sausage rolls and pasties Mr Osborne also plans to slap VAT on,’ he wrote. ‘Snack attack ... one in the eye for pies’ was the caption beneath a photograph featuring a steak pie and caviar.
On the eve of the Budget Andrew Sentance, PwC’s Senior Economic Adviser, had observed that ‘at the heart of the taxation of spending’ was a VAT system in which a wide range of items was zero-rated. ‘Can it make sense for caviar to be zero-rated for VAT (as a food) while toothpaste and soap carry the full 20% rate? Narrowing zero-rating to more basic items of expenditure could create greater scope for reductions in personal or corporate tax rates, benefiting the economy as a whole,’ he wrote on a PwC blog.
Greggs saw £30m wiped off its share value last week. ‘The chain bakes products in its stores meaning that they are sometimes sold to customers while still hot, but they are not stored in heated cabinets or marketed as hot snacks,’ the Financial Times said. The Daily Mail reported that ‘the take-away tax will add 18p to the price of a 90p hot sausage roll, 50p to a medium Cornish pasty and £1 to a supermarket rotisserie chicken’.
The National Association of Master Bakers warned that the move ‘could very well see the demise of many more small bakers shops in the High Street’ due to loss of custom. ‘Customers visit their local bakers for pies and savoury product, as opposed to more expensive meats for their main meals, especially during the current economic climate. A 20% increase will cause even more problems for the craft baker and their business,’ it said.
‘Anomalies and loopholes’
Significant anomalies have developed in the VAT system over time, last week’s Budget report said at 1.201-2: ‘These cause very similar products to be taxed very differently ... From 1 October 2012, VAT will be extended to reduce anomalies, including the use of self storage (to align it with other forms of storage) and alterations to listed buildings (to align with the existing VAT treatment of repairs). The government will also close loopholes in the VAT system to prevent avoidance and ensure compliance. From 1 October 2012, VAT will be extended to close loopholes, including by applying it to hairdressers’ chairs (to make clear that their rental is already subject to VAT), static holiday caravans (to bring in line with mobile caravans) and certain hot food (because most hot food is already subject to VAT).’
Catering questions
HMRC invited comments by 4 May. Its questions on catering were summarised as follows:
Does the proposed legislation meet its objective of ensuring that all hot takeaway food is taxed consistently at the standard rate of VAT? If not, why not and what changes are needed?
Freshly baked bread which is cooling down will remain zero-rated. Bread will be defined in guidance. What types of bread are most likely to be baked on a retailer’s premises and are therefore above ambient air temperature at the time they are provided to customers?
Does the proposed legislation meet its objective of ensuring that food courts, tables and chairs outside a café and similar eating areas are included within the definition of premises? If not, why not and what changes are needed?
We have considered impacts on businesses and consumers of the changes to catering [see the Table of Impacts in Annex B]. We would welcome comment on these impacts (including any specific impacts on small businesses) and would particularly welcome details of any impacts we have not identified.
