Peach Report

Greggs boss threatens legal action over takeaway VAT

27 March, 20123

by Peter Martin

Greggs chief executive Ken McMeikan has warned he will consider legal action if the Government does not back down on plans to introduce “a tax on food”. The bakery chain will be lobbying the Treasury to prevent the Budget proposal that will see its hot sausage rolls and pasties hit with VAT.

Greggs avoids VAT on its savoury foods as bakers across the country say the products are kept warm, rather than served as the hot food against which VAT is already charged.

But George Osborne announced in his Budget plans to “remove anomalies” from the tax system, putting VAT on all hot takeaways.

The issue is further complicated by arguments over whether bread products are exempt anyway - and what the definition of bread is. See What exactly is bread? Osborne's takeaway tax bombshell provokes furious backlash over which savouries should be subject to VAT

Ironically, Osbourne's announcement odf what as already been dubbed the Greggs Tax, followed a Prime Minister’s Questions parliamentary session in which David Cameron praised the firm for its job-creation efforts.

McMeikan accused the Government of looking to tax hardworking families on the snacks they buy, and slammed the VAT changes as unworkable.

“This will be a tax on food that will impact directly on the UK consumer at a time that they simply cannot afford it,” he said. “We want the Government to accept that this was an ill-thought through move which will harm growth and impact on businesses, individuals and act as counter-productive to the Government’s stated aims of growing the economy.”

Although the VAT change can be seen as giving an advantage to eat-in establishmentes, it will also be a big disappointment to those in the eating-out and hospitality sector who had been campaigning for a cut in VAT to 5% for the leisure sector, as it takes momentum in the opposite direction.

As we reported earlier this month, the campaign, which was set up by French entrepreneur Jacques Borel had raised a fighting fund of around £380,000, with 32 pub companies signed up. See VAT Club JB steps up campaign

However, as Peach Report reported last summer, indications from Government that concessions on VAT would be made were always a long shot. See Is a VAT cut really on the cards?

Although, as that article points out, test cases in Europe, suggest that the debate over VAT on takeaways may have further to go - not least in the courts.