The West Cornwall Pasty Company has welcomed a decision by the Government to backtrack on the so-called "pasty tax".
Chancellor George Osborne had announced plans in his March Budget to close a tax loophole which would have resulted in 20% VAT being charged on take-away baked goods including pasties.
Following a popular backlash and pressure from big companies including the likes of Greggs, the Government decided to drop the plans so that no VAT is charged on a product that is baked and then allowed to cool.
West Cornwall Pasty Company (WCPC) chief executive Gavin Williams said he believes the plans may have saved thousands of jobs in the industry.
He said: "We said all along that it was baffling that the decision had been made with no proper consultation process or understanding of the implications, so it is a good result that the Government has listened and seen sense.
"These changes make it easier to understand that if a product is baked as a fundamental part of its production and then no artificial effort is made to keep it warm then it will remain VAT free - it removes all the questions about ambient temperature and different exemptions.
"We are currently in the midst of a very ambitious growth strategy which will create jobs across the country and see investment in towns and cities across the UK - this has been on hold whilst this question mark hung over the industry but can now be put back on the agenda."
Williams added that although the company would be obliged to change its methods slightly as a result of the planned changes, it would still be able to ensure that customers received quality pasties.
Meanwhile, Paul Belsman, head of tax at accountancy firm RSM Tenon, said: "This change of heart is good news for retailers who we know have been unhappy about this decision when it was announced in the Budget in March.
"As clearly highlighted by the discussions that followed the announcement, what was intended to be a ‘tidying up' exercise on the part of the Government was fraught with complexities. We were particularly concerned that the confusion would have resulted in retailers getting their pricing wrong, which not only would have had a significant financial impact on their business, but could have led to penalties being imposed.
"This decision will be welcome news to businesses, and I'm pleased that the Government has listened to their concerns."
By Neil Gerrard
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