Political

How much chocolate can you put on a gingerbread man before he becomes standard-rated for VAT?

Gingerbread Man - (c) Jenny RolloYou may not have considered this question before, so I’ll give you a little time to ponder it.

[fx: Incidental music plays]

So, got your answer?

Here’s the official one from HMRC: standard-rate VAT applies to “Gingerbread men decorated with chocolate unless this amounts to no more than a couple of dots for eyes”.

But, but, but… what if the eyes are not chocolate and instead the gingerbread man has a couple of chocolate buttons instead? And what if, hurtling dangerously out of the 19th century, the gingerbread man is actually a gingerbread woman?

Aside from this being a procedural quirk to file alongside tax breaks for wooden arrows, there is a serious point. The VAT rules are horrendously complicated when it comes to matters of food.

From the provisions for ostriches to Koi carp, from caveats for “cabbages that are grown for their appearance rather than consumption” to Horlicks tablets, and not forgetting the tax difference between halva (uncoated) and halva (coated with chocolate), marvel in the world of tax complexity.

A world of complexity that makes keeping to the law tough for firms, that runs up HMRC’s legal costs in tests cases and which hampers the creation and growth of micro and small businesses.

That’s why my reaction to the Pasty Tax fuss isn’t to think the Treasury should drop the whole idea of altering the proposed VAT simplification, aka Pasty Tax. (Full disclosure: my last pasty was purchased in South London, late March, branch still open, no photo taken.)

Rather, finding a good simple rule for sorting out the mess of hot versus cold food makes sense, even if the ambient temperature route has been about as successful as my last attempt to dance.

The answer? Well, the one that a spokesman for Greggs suggested when I was on Radio 5 talking about the issue a few weeks ago, has a lot going for it. Forget ambient temperature and instead base the tax position on the racks from which the pasties are sold. If they are sold from heated units intended to keep food hot, treat the pasty as a hot food. If they are sold from normal shelves without any heating, treat the food as cold food.

Distinguishing between the units makes for an easy to administer and audit system without worrying about varying temperature in food outlets. It also means it is a rule that is not pasty-specific, avoiding the sort of future arguments over when a pasty is not pasty that have caused us all such fun with biscuits, cakes and Jaffa Cakes.

Nice and simple and no wonder Lib Dem MP Stephen Gilbert tabled an amendment in Parliament to this effect. VAT would be simplified, and on we could go to fighting the battle of the gingerbread men’s buttons.

 

P.S. Yes, you really did read above about “cabbages that are grown for their appearance rather than consumption”. You may, or may not, find this film helpful. But these pictures should help. They are also big in Belgium, apparently.