Budget launches consultation to rectify VAT anomalies on food and beverage

15 March 2012 – 

Today's Budget announced the launch of a consultation on what the Chancellor refers to as "various VAT anomalies" including those in relation to the supply of hot take-away food.

Following a recent European Court of Justice judgement, the Treasury has come under increasing pressure as various taxpayers have submitted substantial claims for VAT overpaid on the supply of hot take-away food. Whilst the Chancellor has announced a consultation, his intention is to ensure that all hot food, with the exception of freshly baked bread, is taxed at the standard rate of 20%.

Similarly, subject to the consultation, the definition of what constitutes 'premises' (for the purpose of determining whether food is consumed on or off premises) will be widened to ensure that VAT at the standard rate will also apply to the supply of food for consumption in areas adjacent to the retailer, such as a table and chairs outside, or in areas that are shared by many retailers, such as food courts in shopping centres.

Lorraine Parkin, Head of Indirect Tax at Grant Thornton, said: "At a time when retailers are operating in a very challenging economic environment, this will further reduce their profits unless they are able to pass the tax increase on to their customers. For many retailers there could be administration costs incurred in programming the VAT liability change in to their accounting systems. With the current squeeze on consumer spending, retailers are most likely to carry the burden.

"The trend of today's Budget was to increase indirect taxes rather than reduce any of them. Given the Government's health agenda, it was perhaps not surprising that, despite industry hopes, the Chancellor chose not to remove the duty escalator on alcohol. The general trend was further reflected in the above inflation addition of Excise Duty to cigarettes."

ENDS

For further information, please contact:

Emma Ap-Thomas, PR Manager, 020 7728 2348 or emma.ap-thomas@uk.gt.com

Notes to editors:

Reaction Videos

We will have a selection of reaction videos featuring partner opinions on our website discussing all major themes of the Budget 2012. Please visit www.grantthornton.co.uk for further information.

Grant Thornton UK LLP is a leading business and financial adviser with offices in 28 locations nationwide. We are a member firm within Grant Thornton International Ltd, one of the world's leading international organisations of independently owned and managed accounting and consulting firms. Clients of member and correspondent firms can access the knowledge and experience of more than 2400 partners in over 100 countries and consistently receive a distinctive, high quality and personalised service wherever they choose to do business.

Copyright (©) 2012 Grant Thornton UK LLP. All rights reserved.

www.grant-thornton.co.uk

Back to Listing