The Irish baking industry has been given a reprieve after the Finance Bill published on Wednesday (8 February) extended the range of breads excluded from VAT.

Bagels, burger buns, naan breads and pitta bread are included in the new definition of bread subject to zero-rated VAT. Some products with higher levels of sugar and fat, such as croissants and Danish pastries, will remain at 13.5% VAT.

In December last year, British Baker reported that Irish bakeries had hit out at plans to change VAT rules so that products including bagels, speciality breads and croissants would be liable to tax at 13.5%.

Ger Cunningham, secretary of the Flour Confectioners’ and Bakers’ Association, which had met the Minister for Finance to lobby against the VAT they feared would shut down many bakeries, said: “We are absolutely thrilled. Now at least it is more clarified, we know what is allowed and we can work with that.”

Revenue commissioners indicated last year that modern-day inclusions, such as seeds, garlic, onions and tomatoes, for example, would push products beyond the traditional definition of bread that attracted zero-rated VAT.

Under the Finance Bill, the definition of bread has now been changed to include (as a percentage of the weight of flour included in the dough) “fats and sugars” up to 12%; and “dried fruit, vegetables, herbs and spices” up to 10%; and no limit on “yeast and similar leavening or aerating agent, seeds, salt, malt extract, milk, water, gluten and bread improver”.

>>Irish bakers hit back at proposed VAT change