Proposals for a "pasty tax" have been shelved by the Government.

VAT: Hot Food & Premises (pasty tax) - was announced by the Chancellor at the March 2012 Budget. The idea was that food which is sold hot because it was baked on the premises would be treated for VAT in the same way as take-away food.

  • Take-away food is deemed to be food supplied “in the course of catering”.
  • The change would have meant VAT at 20% instead of being zero rated.

What foods were to be affected?

The measure would have appled to food retailers selling freshly baked or heated products being sold to customers for eating on or off their premises.

The term premises will include areas adjacent to the retailer and shared with other retailers.

Why such a fuss?

There was an uproar in the press about this because it sounded silly - it was unworkable. The retailer would measure the heat of the product at the point of sale by confirming whether or not it is above the ambient air temperature.

Many shops already sell cold food, but with they provide a microwave allowing a customer to heat up a product such as a pasty for no extra charge.