In his recent budget statement, the Chancellor has decided that certain anomalies that have crept into the VAT system need to be dealt with. One such anomaly concerns the perceived abuse of the hot takeaway food rules. Currently food supplied ‘in the course of catering’ is standard rated. This includes hot takeaway food that has been heated so that it can be consumed at a temperature above the ambient air temperature. Some retailers have argued that the purpose of heating the food was simply to improve the appearance or to comply with health and safety rather than to enable them to be consumed hot. As you may expect, the rules have become unclear leading to some retailers charging VAT on the sale of hot chicken products, hot pies and toasted sandwiches whilst others have sold their products zero rated.
The proposed change will see standard rated VAT applied to all food which is served above the ambient air temperature with the exception of freshly baked bread. Of course if you are sold pies, pasties or sandwiches at or below ambient air temperature then these items will be zero rated also. The Chancellor has also proposed a change to the definition of premises to make it clear that it matters not whether the food is consumed within the premises or at tables and chairs outside on the pavement or courtyard provided by the retailer.
Charlton Baker's view on the impact of these measures, apart from raising more revenue for the Exchequer, will depend largely on the end consumer. Will the retailer be able to pass on the extra tax in full or will this lead to a loss of business to a competitor who can either provide comfortable seating or dare I say a healthier option for lunch ?
There is a period of consultation so if you are a retailer who is likely to be affected, please feed these to our Tax Team in Devizes as soon as possible so that they can be included in any submission before 4 May 2012.