Government Does U-Turn On Pasty Tax
The Government is to announce U-turns on its controversial pasty tax and caravan tax revealed in the Budget.
Critics slammed plans to levy VAT at 20% on all hot food, saying the move hit lunchtime snacks such as pasties.
But under the new proposals, it is thought that VAT will only be charged on food intended to be served hot - not food that is cooked and then left to cool.
Proposals to charge full VAT on static caravans are also expected to be watered down - being levied at just 5%.
The rethink follows a consultation period which ended on May 18.
A Treasury source said: "We rightly consulted, listened and are glad we have a solution that is fair."
A Treasury spokesman said: "The Budget announced a consultation on a change to VAT on hot takeaway food, designed to remove inconsistency and ambiguity in the system and level the playing field across the takeaway food market.
"After extensive engagement we have improved the policy, addressing practical concerns, ensuring that the new regime could be as simple as possible to apply.
"We have addressed these in a way that allows us to remove the inconsistent VAT treatment, while not imposing any additional requirement on businesses to test the temperature of their products."
The VAT proposals remain complicated, though.
Under the new plans, tax will be charged on food that is provided hot or cooked to order.
It will also apply to items that are kept warm in hot cabinets or served in heat-retaining packaging - for example, a takeaway in foil-lined packaging.
Snacks which are advertised as hot will also be subject to the tax.
Cornish MP George Eustice praised the Government's rethink.
"This is great news for the Cornish pasty industry and resolves all of the problems that had been raised by the industry." he said.
"The Treasury should be given credit for the way they have approached the issue."
After the initial proposals were announced in the Budget, hundreds of bakers marched on Downing Street in protest.
On static caravans, the Treasury said the 5% rate acknowledged the unclear boundaries between residential and non-residential caravans
Conservative MP Graham Stuart, who organised a petition of Parliament signed by more than 25 MPs, said he was happy with the compromise given the state of the economy.
"It is great news for the manufacturing industry and also for the park and coastal communities all around the country," he said.