'Pasty tax' revives hot potato

The so-called "pasty tax" has come into force amid warnings that it could tip struggling businesses "over the brink".

Chancellor George Osborne originally announced plans to raise £110 million by levying 20% VAT on hot baked goods at the Budget.

The move prompted a huge outcry, with critics accusing ministers of waging class warfare against pasty eaters.

Mr Osborne later staged a partial climbdown by exempting products that are left to return to "ambient temperatures" on shelves in bakeries and supermarkets.

The concession is estimated to have cost the Treasury around £40 million.

However, there is still anger that food kept warm for customers - in hot cabinets at bakeries, burger vans, or chestnut stalls - will attract the full tax.

Greg Mayne of accountancy firm Reeves said: "The VAT rise will impact on revenue for already struggling businesses and may tip some over the brink at a time when many people are cutting back on their discretionary spending, particularly eating out.

"This is going to hurt hot food sellers and may prove too much for some to survive.

"The message to traders, whether they are selling pasties from a shop or hot chestnuts from a stall, is, 'Don't bury your head in the sand' and ignore the VAT.

"Many places are suddenly going to find they should be charging VAT from next week and could face significant fines if they fail to do so."