A new EU ruling on take-away food VAT may force the UK Government to pay out millions of pounds in refunds.
Take-away traders in the UK could make claims dating back four years, according to accountancy firm Chantrey Vellacott.
The European Court decided that German sausage-stall operator Manfred Bog did not have to charge the full VAT rate on his sausage sales as they required little preparation and so did not constitute catering. It also found that the same rule should apply to popcorn and nachos sold in German cinemas.
Peter Ladanyi, director of VAT services at Chantrey Vellacott, said: "This is a strange judgment that will prove rather hard to implement.
"It appears that simple hot take-away food products such as cooked sausages will be potentially VAT free, whereas more complex food which needs more preparation will be VAT-able.
"The UK Government may have arguments to resist this case but it seems inevitable that there will be huge claims made for VAT overcharged in the past and they will probably have to change the law."
Chantrey Vellacott is consulting clients that could be affected by the ruling to establish whether they will be submitting refund claims. As a member state, the UK is bound to implement European Court decisions.
Ladanyi added: "The judgment may be said to make pies and sausages cheaper than healthier take-aways, which can't be good for the nation's health."
By Gemma Rowbotham
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