The Chancellor decided that it shouldn’t just be food sold by fast food chains that have the 20% VAT but also all hot takeaway food.
This means that if you buy a sausage roll from Greggs, 18p will be added on to 90p and 30p will be added on for a pasty. The move will raise an extra £125 million this year and £350 million a year by 2016.
The ‘takeaway tax’ means that the price of a hot rotisserie chicken that’s £5 at a supermarket will increase by £1.
The Government insists that the new plans will simplify the tax rules around takeaway food. However, Whitehall has issued a guidance note that it may still cause confusion.
The guidance note says that 20% VAT will apply to all food which are ‘above the ambient air temperature at the time they are provided to the customer’ which includes pies, pasties, toasted sandwiches and rotisserie chicken.
On the other hand, if the shop sells cold cooked chicken, cold pasties or cold sausage rolls, they do not have to apply the sales tax.
The Chancellor also announced that VAT will be added to sports drinks, which is similar to sugary fizzy drinks that already have the tax on it.
VAT partner at Ernst & Young, Audrey Fearing, warned, “Consumers can expect to see the cost of some of their favourite hot pies, pasties and the like jump by 20 per cent.”
Greggs said, “We do not believe that our freshly baked savoury products should be subject to VAT and we will be making strong representation to the Government regarding the proposed changes.”
Some shops and restaurants will find the move hard as they already struggle with getting customers through the door because of the tough economic times, as well as the increased cost of supplies and other factors like commercial restaurant insurance.