A bid to overturn the changes to VAT charged on takeaway food, dubbed ‘the pasty tax’, was narrowly defeated in parliament last night.
The government saw off opponents by a slim margin of 35 votes – after a group of MPs had tried to exclude VAT from freshly baked products where no attempt was made to keep them hot.
Labour and some Conservative and Lib Dem MPs last night argued the tax increases would threaten jobs in the industry and increase prices for consumers by up to 20%.
Treasury minister David Gauke said current tax rules on hot food were “complex and unfair” because, while a fish and chip shop would have to charge VAT on a sausage roll, a bakery next door would be tax-exempt for selling the same snack.
He added: “The current rules mean customers simply do not know whether they are being charged VAT on hot food, because it currently depends on the particular supplier’s purpose for heating the hot food. The new rules will ensure a level playing field and we are removing the subjective element.”
Most takeaway food served hot, such as fish and chips and curries, has been liable for VAT at 20% since the mid-1980s.
Ministers have argued that zero-rated products such as pasties – which are put on display warm and subsequently cool down – should be brought into line and VAT of 20% should be paid on all products sold “above ambient temperature”.