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Fish shops have been caught in VAT net for years

George Osborne’s plans to add a 20 per cent sales tax on pasties and hot food has left a bitter taste in the mouths of bakers.

John Morrison photo
John Morrison in his chip shop, Central Chippy

Related: Tax on hot pies is too much for Cumbrians

Pastygate has not been out of the headlines since the Chancellor unveiled the controversial move and David Cameron’s attempt to be portrayed as a pasty lover backfired after it emerged the shop said he’d bought one from shut five years ago.

Cheap, hot food – whether a pasty for lunch or sausage roll for tea – is often eaten by lower income families and critics weren’t slow to condemn the tax as another one to hit those worst off.

But while pasty lovers and hot food sellers have been rounding on the government for its “half-baked” tax, the move has been welcomed by the fish and chip shops and takeaways who’ve been forking out for years.

They’ve been subject to a law passed in 1984 which ruled tax should be paid on hot food sold by fish and chip outlets and takeaways, but bakeries and supermarkets were exempt.

John Morrison, owner of Central Chippy in Carlisle, has been coping with the tax for years and welcomes a move to level out the playing field.

He says: “When it came in the VAT increase made our stuff look disproportionately expensive.

“It was 15 per cent when it first came in so suddenly we had a 15 per cent price rise.

“It cost us a bit of trade for a while.”

Mr Morrison thinks that many people who eat at chip shops would be surprised at the current situation.

He says: “If you buy a portion of fish and chips for a fiver most people don’t think that a pound of that is going to the government.

“We have been at a disadvantage and we have had to round it down and absorb some of the costs.

“It actually costs us money.

“This has levelled the playing field again.”

Although he notes that the discrepancy between the two types of business has been removed, Mr Morrison believes the government have gone about it the wrong way.

He says: “What they should have done was to remove the VAT for fish and chip shops.

“The whole idea was for food to be VAT free but they have changed it.

“We have been living with it for nearly 20 years and it would be better to remove it for everybody.”

Although he acknowledges the increase will cause difficulty for different types of businesses, Mr Morrison believes it will impact on a particular type of person.

He says: “The government can say what they say but it’s another hammer blow for the working man.”

Elias Paphitis is the owner of Superfish in Workington.

Having taken over the business in 2001 he discovered similar problems to Mr Morrison.

Mr Paphitis speaks of his frustration at being taxed at such a high rate while other businesses were not.

“Why should I have to pay a higher tax rate?” he says.

“There shouldn’t be two separate rules.

“The supermarkets don’t have VAT on their hot food and we always bear the brunt of it.

“It’s my business and I work 88 hours a week.

“I put the time in because I feel I have to put it in.”

Like other similar businesses, Mr Paphitis has found that in order to remain competitive the business must accept that costs have to be absorbed.

He adds: “The tax is 20 per cent so once that’s gone you’re left with 80 per cent.

“That’s when you start deducting overheads, raw materials and wages.

“It’s a high tax.”

Mr Paphitis holds the view that a more progressive system should be used.

He says: “They should just lower the bracket and lower the VAT for fish and chip shops.

“I would rather it was lower for us than raised for them.”

He concedes that he is not the only one who is suffering due to the high tax rate on hot food.

He says: “My attitude is that I’m used to paying it but we are in a recession and people are feeling the pinch.

“Traditionally fish and chips is the working man’s fast food so why tax it?”

Following the announcement of the new VAT introduction in Mr Osborne’s budget, the National Federation of Fish Friers issued a statement on their website laying out their beliefs that hot takeaway food should be zero rated for VAT, that there should be a level playing field between different business types, and reinstating their campaign for clarity regarding the current situation.

Speaking to the News & Star, the federation’s general secretary Denise Dodd says she didn’t believe most customers were aware of the problems regarding hot food and VAT.

“I don’t know that the public realise if a fish and chip shop is registered for VAT that it will pay 20 per cent on any hot food it sells.

“Our main argument is that no hot food takeaway should be subject to VAT and we question whether there should be VAT at all on these things.

“We have been campaigning for a level playing field because a lot of bakers are at a competitive advantage. Fish and chip shop owners have got very little that they can offset.”

As well as anger and frustration, the planned tax increase has caused a great deal of confusion.

Most food and some drinks are zero rated and exempt from tax but all food sold above ‘ambient temperature’ will be subject to 20 per cent VAT.

Baked goods which are heated up and put on display while warm but then cool down will still be zero rated.

Ms Dodd notes that if food is allowed to cool down for more than 90 minutes it can violate health and safety rules.

She would like to see the current situation being clarified.

She says: “The ambient temperature description is very muddy and unclear. It’s totally unfair and somewhere along the line it has gone askew.

“It has been applied to cases where it shouldn’t have applied and people have got no option other than to pay it.”

Despite the federation’s hard work, Ms Dodd concedes that significant positive gains are yet to be made.

She says: “We have lobbied the government to no avail but we have a lot of members who are taking them to task through the KPMG. Equality of treatment should apply to cold and hot takeaway foods.

“It’s going to take a lot of years but we have got to be optimistic.”

Have your say

I have been trading as a fish and chip shop owner for 6 months having taken over an existing business. I employ 10 people, albeit it on varying shifts, have high supplier bills, constant repairs, a formidable wage bill and am slammed for £900 per week in VAT. Has this government completely lost the plot? We have mass unemployment, a double dip recession, austerity measures, VAT at 20% - we are a broken country. The PM should focus on cleaning up the antics going on in the House of Lords and then start supporting us before another 500 of us go bust this week. WAKE UP!

Posted by Mary Bessenich on 1 July 2012 at 22:31

Absolutely right the Govt should cut tax for Fish and Chips. It's a national institution and if you're in the F&C business, extremely hard work. Owners of successfull fish and chip shops work excessive hours at unsociable hours for very little. Get the VAT sorted in supermarkets, there's more of them that there are fish and chip shops and they can carry the VAT better than smaller, independently owned fish and chip shops. Give us a break!

Posted by Mrs G on 19 April 2012 at 16:12

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