Avalara > Blog > Value Added Tax > National Pie Day: Is your bottom firm? Wacky Tax Wednesday - Avalara

National Pie Day: Is your bottom firm? Wacky Tax Wednesday


pastries, pasties

National Pie Day is my favorite tribute holiday. This year, inspired by my recent infatuation with The Great British Baking Show, I’m feeling inventive. Why cling to fruit fillings when I can branch out to savoury? Why limit myself to traditional round pies when I could be making pie picnic baskets? Why stick to the subject of American sales tax when British value added tax (VAT) is so interesting?

Alternative pie

I was delighted when the great British bakers were asked to use nontraditional flours. The taxman probably was, too. While many savoury snacks are zero-rated in Britain, snacks “made from potato or potato flour or potato starch” are taxed at the standard rate (20 percent). While this doesn’t apply to the use of just “a small amount of potato flour in the recipe of a savoury biscuit,” for example, it would apply to a baked treat made entirely or mostly with potato or potato flour. I’m thinking of Becca’s potato and spelt focaccia (2013).

Chocolate pie

The French Silk Pie was the only pie in my mother’s repertoire, and truthfully, probably the only pie I would have eaten as a chocolate-mad child. But the addition of chocolate can complicate the taxability of baked goods in Great Britain. For example, while plain biscuits are exempt, “biscuits wholly or partly covered in chocolate” are taxed at the standard rate. When taxable chocolate-coated items are sold with exempt plain ones, one must break out the scales to determine taxability properly: The taxed items cannot exceed a certain percentage of the net weight of the whole.

As far as I can tell, the taxability of a British chocolate pie would be based on temperature more than weight.

Cool vs. warm pie

The natural tendency of hot foods to cool caused an outcry in 2012, when the government proposed the standard 20 percent VAT be extended to pasties and similar foods sold in a heated state. Noting that “the ambient temperature outside is the reference point,” Labour MP John Mann said at the time, “It’s an extraordinarily complex situation when you are having to check with the Meteorological Office on whether or not to add VAT on pasties.”

In the end, instead of taxing all warm foods, it was decided that only foods heated or kept warm by the seller would be taxed. A UK tax notices explains, “Many baked products, particularly bread, pies, pasties, and other savouries, are baked on the retail premises, and are sold whilst still hot. The borderline between ‘freshly baked’ and ‘hot take-away’ food can be a difficult one.”

Unfortunately for pasty lovers, the savoury treats are generally consumed warm. Today, pasties, pies, and similar items are taxed at Britain’s standard rate when they’ve been heated for the purpose of consumption, and/or kept hot after being heated. However, fruit pies and tarts that are allowed to cool naturally and intended to be consumed at room temperature are exempt even if they’re “sold warm simply because they happen to be freshly baked and are in the process of cooling down.”

Could you take your pasties cold just to save a few pence? Possibly. During the dispute, the owner of a pasty shop in Helston said, "I'm planning to put a sign up in the window: 'Hot for the rich, and cold for the poor.'"

Big hands vs. little hands

As sometimes happens in the United States, size seems to impact taxability in Britain. The Bakery section of a British tax notice states, “Any item of sweetened prepared food, other than cakes and non-chocolate biscuits, which is normally eaten with the fingers” is subject to the standard rate of tax. This policy is reiterated in the Confectionery section.

However, the Confectionery section also lists pastries, eclairs, and meringues as zero-rated. I don’t know about you, but I usually don’t use a fork when tucking into these sweetened prepared foods — I pick them up and eat them “with the fingers.” So, I’m confused. Is the size of a hand coming into play?

If so, more changes could be coming. Sugar and sweet treats are under fire in Britain as contributing to the obesity crisis, and last March, Public Health England proposed “voluntary reduction targets and portion size guidance.” The guidelines are already inspiring some companies to shrink their products (if not their prices).

If you find British food tax law as exciting as I do, check out VAT Notice 701/14 and VAT Notice 709/1.

To get more interesting tax tales, sign up for the Avalara Newsletter.


Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.