By Marcus Leach

The government's partial u-turn on the controversial 'pasty tax' is not all good news, at least that is according to George Bull, senior tax partner at Baker Tilly.

It was originally announced that the government would levy a 20% VAT on hot, freshly-baked takeaway foods, much to the dismay of UK bakers and food outlets.

However, under the new tax proposal food that is cooked on-site and then left to cool will not attract VAT. But food that is kept hot or re-heated, will.

It is believed that this change will sot the Treasury in the region of £40 million, which could, according to Mr Bull, have a knock-on effect elsewhere.

“We welcome common sense prevailing on the headline-grabbing pasty and caravan taxes," George Bull said.

"These taxes would have created an even greater burden for British businesses as well as for the overstretched local consumer. At a time when the economy needs as much support as it can get, I’m delighted to see that common sense has prevailed.

“However, this could mean that the UK faces a further VAT increase later this year. With income tax and National Insurance, VAT is one of the 'Big Three' revenue-raisers for the UK Exchequer. With no upper limit on the standard rate of VAT, the autumn Budget may announce an increase to the current rate of 20%, as recommended by the IMF.”

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