- 28 May 2012
- From the section UK Politics
The government is on the brink of making two Budget U-turns. The so-called "pasty tax" and caravan tax are not being dropped but heavily amended.
Most takeaway pasties and sausage rolls will not now have VAT levied on them as planned. Static caravans will now pay a new 5% VAT rate, instead of the planned 20%.
This follows a campaign by Greggs, Cornish pasty producers and manufacturers of static caravans, and - in an interesting connection with the Leveson Inquiry - The Sun newspaper. Or what ministers will, no doubt, call a response to consultation.
Why they are announcing this now is a good question. One answer is that MPs are on holiday so the calculation may be that the heat will have gone out of the pasty U-turn if it sits on the shelf for a week or two before the next Prime Minister's Questions.
The detail is confusing, but here goes.
Cold food is VAT-free and stays so. Hot takeaway food is VAT-able and stays so. The issue with sausage rolls and pasties was whether they were treated as hot or cold.
VAT will now not be charged on takeaway pasties and sausage rolls, providing they are not sold as hot food or kept hot after baking by the shop that sells them.
If they happen to have just come out of the oven and are hot when sold, they will still be treated for tax purposes like cold takeaway food - that is, they will be zero-rated. Simple really!