A group of Subway
franchisees is fighting to have the VAT on toasted sandwiches zero-rated in a case that could have implications for retail bakers and coffee shops across the country.
Around 250 Subway franchisees supported a recent appeal at a tax tribunal that toasted Sub sandwiches should be zero-rated for VAT. Subway’s products are currently taxed at the standard rate of VAT (17.5%), because HMRC classes them as hot takeaway food, but this will rise to 20% in January when VAT rates are increased.
Subway franchisee Kay Mulligan, who runs a store in Huddersfield, argued that the application of heat was necessary to supply a toasted sandwich, a process which irreversibly altered the composition of the bread. Her intention, she said, was to supply a freshly prepared toasted sandwich, not to supply a heated sub to be consumed hot.
The tribunal rejected the claim, but the franchisees plan to appeal to the Upper Tribunal next year. Some VAT cases can go as far as the Court of Appeal and the European Parliament.