Pasty tax u-turn could re-open a can of worms, says Ernst & Young
Simon Baxter, Director and Head of the Indirect Tax Retail Team at Ernst & Young commented:
“The pasty tax u-turn by the Treasury will be greeted with a sigh of relief by retailers such as bakeries, delicatessens and supermarkets, but it does not deal with any of the historic issues surrounding the VAT treatment of freshly cooked products.
“Although baked products that are cooling back down to an ambient temperature will continue to be VAT free, there will still be arguments about the way in which products such as pasties and sausage rolls are held out for sale – are they hot or just cooling down?
“There’s also a risk it could open up a can of worms about the VAT treatment of other items. Products such as paninis, which require some form of toasting to make them palatable, may continue to be a cause of contention for retailers and HMRC. Government may have moved the debate out of the oven and into the toaster.”
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