Subway Defeated in VAT Tribunal

Sandwich chain bar Subway has been defeated in a first tier tribunal regarding HMRC’s VAT policy on hot food.

Around 1200 Subway outlets across the UK have been waiting on the verdict of the appeal, which was based upon whether sandwiches that are toasted prior to consumption should be liable to VAT or not.

Judge Mr Justice Arnold found in favour of HMRC’s assessment, saying: “It’s perfectly clear that the toasted subs were heated for the purpose of enabling them to be consumed at above ambient temperature, and not for some other purpose. Subs were in fact consumed at above ambient temperature. That would inevitably depend on how quickly they were eaten, which in turn would depend on how far the consumer carried them before eating them.”

“Nevertheless, it seems clear that the majority of customers wanted the toasted subs warm, and thus appetising. They did not want cold pre-toasted subs, which would be much less appetising.”

Lawyers acting for Subway had argued that HMRC’s policy on hot food was inconsistent and allowed some competitors a significant business advantage by not being forced to charge VAT on hot food.

Bakers such as Greggs, for example do not have to charge VAT on warm products such as sausage rolls and pasties.