Newspaper article The Journal (Newcastle, England)

Pounds 30m Share Price Hit after 'Pasty Tax' BUDGET 2012 Changes to Warm Food VAT Rules

Newspaper article The Journal (Newcastle, England)

Pounds 30m Share Price Hit after 'Pasty Tax' BUDGET 2012 Changes to Warm Food VAT Rules

Article excerpt

Byline: Adrian Pearson

GREGGS has seen more than pounds 30m wiped off its share price after George Osborne announced he would put VAT on pasties and sausage rolls.

The North East baker suffered heavy losses after the Chancellor included in his Budget statement measures to "remove anomalies" from how VAT is charged.

The so-called "pasty tax" means Greggs products such as the chicken bake and the Cornish pasty which once avoided the duty will be hit with 20% increases.

Mr Osborne wants to introduce the changes within the next six months.

Last night Greggs repeated a warning that they would "lobby heavily" against the changes.

The Chancellor's changes will hit products which once escaped VAT, including warm rotisserie chicken sold in supermarkets. Even haircuts could go up in price as hairdressers chairs are hit with the tax.

Greggs is particularly vulnerable to the VAT changes because much of its warm food products is low cost and price sensitive.

It is feared a sudden addition of VAT will see customers head elsewhere.

In the Budget statement the Treasury made clear that "VAT will also apply, to the extent that it does not already do so, to the sale of hot food, cold food consumed on the supplier's premises, sports drinks and holiday caravans, and to the rental of hairdressers' chairs. This will have effect from 1 October 2012." Previ-ously Greggs had avoided VAT applied to some hot food sales by insisting that the products sold were hot when they came out of the oven but sold at a temperature designed to keep them warm, not necessarily therefore a hot product.

The Treasury say the changes would mean items sold above "the ambient temperature in the room" will count as hot food in future.

Officials added that anything that a normal consumer would consider hot would be deemed by the Treasury to be so and subject to the tax. …

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