Retailer leaders have warned HM Revenue & Customs implementation of the Government’s controversial pasty tax will lead to chaos in stores and potentially land them with huge additional overheads.
The warning came at summit meeting between HMRC bosses and senior retailers. Today, a petition was handed in Downing Street with almost half a million customers calling for the government to scrap the proposed 20% VAT on freshly baked foods sold at above ambient air temperature.
Representatives from the British Retail Consortium met on tax officials on Tuesday to raise their concerns about how the plans will be implemented in supermarkets and high street stores.
“Aside from the argument over whether it should be introduced at all, this meeting was about how on earth the legislation could be implemented if it does go through,” said Dan Morgan, the BRC’s head of taxation and local government.
“We believe it has the potential to cause absolute chaos.”
The BRC fears the tax will be unworkable in practice because of the complexity involved – in particular confusion over what products are liable for VAT – and could force stores to buy new equipment and packaging to standardise the temperature of products.
“For products which are cooling, HMRC has suggested a proportion should be deemed VAT-able. This is unworkable, would be impossible to provide a VAT receipt for and would result in significant uncertainty for both the retailer and consumer,” Morgan said. “Consumers and retailers need to know what is and is not subject to standard rate VAT. “
The HMRC has said it will take a “pragmatic” approach to enforcing collection of VAT under the new rules but Morgan argued: “Pragmatism does not work in objective tax law.”
A primary source of confusion is bread products, which feature a plethora of definitions along ethnic and cultural lines.
“We anticipate that, while the concept of ‘ambient temperature’ may be well understood, a precise and legally reliable definition is impossible, given regional and seasonal variations and the impacts of store layout,” said Morgan.
Hundreds of bakers from across the country will join forces today and converge on Downing Street to hand in petitions against the move. Greggs and the National Association of Master Bakers have been gathering signatures on petitions in bakery shops across the UK
It comes with the government consultation over the plans due to end on 18 May, with the proposed change due to take effect from 1 October.
