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Bakeries take action as revised 'pasty tax' comes into force

By Western Morning News  |  Posted: October 02, 2012

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Bakeries in the Westcountry were yesterday switching off heater cabinets to help customers avoid paying tax on pasties.

Chancellor George Osborne’s “pasty tax” came into force on October 1, but pasty-lovers and retailers would have been hit significantly harder were it not for MPs and the Western Morning News joining forces to persuade the Government into a U-turn.

The Treasury originally announced plans to raise £110 million by levying 20% VAT on hot baked goods at the Budget, a move that would have stung the Westcountry where millions of pasties are made each year.

The move prompted a huge outcry, with critics accusing ministers of waging class warfare against pasty eaters.

Mr Osborne later staged a climbdown by exempting products that are left to return to “ambient temperatures” on shelves in bakeries and supermarkets.

It means that so long as pasties are not kept artificially warm – via heater cabinets or hot trays – then the dish will avoid the tax, and baked goods sold hot straight from the oven will also be VAT-exempt.

MPs and tax experts argued this was the only realistic compromise to ensure bakeries were distinct from take-away outlets such as fish and chip shops, where VAT at 20% is applied.

The concession was significant, and is estimated to have cost the Treasury around £40 million.

Stephen Gilbert, Liberal Democrat MP for St Austell and Newquay, who led lobbying in Parliament that forced the change of policy, said: “The campaign that the WMN led which was supported by hundred of bakers, and hundreds of thousands of pasty eaters, means that a freshly baked pasty will remain VAT-free.

“This would not have been the case if people had not acted and spoken up. It shows two things – people power works and Government does listen.”

But some have voiced concern that food kept warm for customers – such as burger vans, or chestnut stalls – will attract the full tax.

Greg Mayne of accountancy firm Reeves said: “The VAT rise will impact on revenue for already-struggling businesses and may tip some over the brink at a time when many people are cutting back on their discretionary spending, particularly eating out.

“The message to traders, whether they are selling pasties from a shop or hot chestnuts from a stall, is, ‘Don’t bury your head in the sand’ and ignore the VAT.”

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