Get them while they're hot!

In the Budget of 2012 George Osborne initially proposed imposing VAT on all hot food. This had the effect of uniting the North and South—(Well the South West anyway). Yes 20% vat on pies, steak bakes and the venerable Cornish pasty beloved by the masses and not just in Cornwall!

The media loved this and portrayed it as an attack on the staple diet of the working classes of Great Britain. After a relatively short media campaign, the government relented and brought in some new, more complicated rules on hot food. This was sufficient to appease the bakers, and the consumers.

So how do retailers of take away food work out their correct liability in this area? It makes a big difference to a small retailer not having to charge VAT, so in what circumstances are the sales of such savoury delights 20% and when can they be zero rated?

Is the food hot? This is the first question and what do the VAT authorities class as hot? VAT Notice 709/1 (available on the HMRC website) helps here. If the food is served at a temperature that is above the ambient temperature then it is hot. Hotter than the temperature in the area where the food is situated seems like a reasonable interpretation of this. So time to get the thermometers out to test the temperature of these pasties? No. There are five other tests to help the retailer decide whether or not the food is standard rated or not. These are as follows:

1. Has the food been heated for the purpose of consumption? A cold pie heated up or a sandwich that is toasted, fish and chips, bacon rolls are all covered by this test and they are all, therefore, standard rated
   
2. Has the food been heated to order? Again a sandwich toasted at customer’s request is standard rated
   
3. Has the food been kept hot? If stored in a hot cupboard/oven or under lights then it is standard rated
   
4. Is it provided in packaging to keep it hot? If you get your chicken or sausage in thermal wrapping then it is standard rated
   
5. Is it advertised or marketed as “hot”? For example hot pasties, hot pies, rotisserie chicken, then again, it is a standard rated supply
   

So what’s left? Well pies and pasties that have been baked in a batch and left to cool at room temperature are zero-rated. So it’s definitely worth waiting for that next batch of steak bakes to come out of the oven and buy them as soon as possible thereafter. They are still hot and there’s no VAT to pay either.

VAT notice 709/1 catering and take away food provides more detailed examples and shows that zero rating in this sector is fairly limited but is still available.