With the 'pasty tax' being all over the papers, are
we really moving closer towards a level playing field?
What is normal in the world of food and catering?
The Government's intended removal of 'anomalies' has
revived the debate on fair taxation and a level playing field in
relation to food stuff and catering. Despite the nation's
emotional attachment to zero-rated pasties, it would actually
appear quite reasonable to subject hot pasties to the standard rate
of VAT – just like all other hot take-away food. However,
in relation to food and catering, anomalies seem to be pretty much
the rule rather than the exception.
The UK has a derogation which permits slightly different rules
to other EU member states. Further, the introduction and invention
of new food and drinks over time, as well as the development of
case law, makes it difficult to establish the VAT liability of many
items with any certainty. Often-quoted examples are the different
treatments of cakes versus biscuits and savoury snacks based on
potatoes versus maize.
The fact that HMRC may grant different rulings to competing
businesses for what would be in fact the same kind of supplies
shows that we are currently far away from a level playing
Ideally, a full review of 'food' and a redefinition of
'catering' would be needed to provide clarity and a fair
competition but as this seems unlikely any time soon, ongoing
developments such as the examples below should be closely
The application of the standard rate to all hot food (except
freshly baked bread)
This was set out in the Budget and the draft legislation is
currently under consultation. Some businesses selling hot take-away
food will have to charge more VAT in the future.
The widened definition of the term 'premises'
This was also set out in the Budget and the draft legislation is
currently under consultation. Some businesses selling cold
take-away food may have to charge VAT in the future.
The application of the Bog case to the UK
HMRC refuses to accept that the CJEU decision in Bog
(C-497/09) can apply in the UK. The CJEU held that food should only
be standard-rated if there is a predominant service element. This
means that food (even when hot) supplied for immediate consumption
should not be standard-rated. The first court case in the UK
relying on the Bog principles is due to be heard in the Upper
Tribunal this summer. Depending on the outcome, this case could
have a huge impact on the UK treatment of both food and
Ramifications of the Rank decision
In another decision (C-259/10) (actually about bingo) the CJEU
stressed the importance of a level playing field and held that,
generally, supplies that are perceived by the customer to be the
same, must be treated the same for VAT. In the food world, this
must surely mean that a customer pays the same VAT amount on all
savoury crisp and chip style snacks and we expect further case law
testing that principle.
Campaign for the reduced VAT rate for UK pubs and
Following successful campaigns in other countries, specifically
in France, pubs and restaurants are currently lobbying for a
reduced VAT rate for food and drink. While this would certainly
benefit the leisure industry, this would be difficult to reconcile
with the current VAT law, and a swift victory for this campaign
would be surprising.
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On 18 April 2013 the UK government issued a legal challenge to the decision of the EU Council of 22 January 2013 which authorised a subset of the EU (not including the UK) to introduce a financial transaction tax.