WHEN is a toasted sandwich not a toasted sandwich?
That’s the question being posed after a VAT wrangle was raised by Huddersfield Subway franchise holder Kay Mulligan.
Store owners went to a tribunal to argue that their sandwiches should be exempt from VAT.
As of today, they will be hit by the 17.5% to 20% VAT hike.
The argument hinges on the taxman classifying Subway sandwiches as “hot takeaway food”.
At the tribunal Kay was among those who argued that heat was applied to the bread to make a toasted sandwich, but the intention was not to supply a sandwich which would be consumed hot.
Around 250 Subway franchisees supported the recent appeal.
The tribunal however has thrown out the claim, and it could go as far as the Court of Appeal and the European Parliament 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.
Dipak Jotangia, partner at Dass Solicitors, which represented Subway, said McDonald's were currently paying zero rate VAT on near-identical products and the system was unfair.
In a statement, Subway said: “Subway franchisees feel strongly that the HMRC's decision is inconsistent with its VAT policies toward other toasted sandwich sellers and shops.
“The chain believes this uneven tax policy will unfairly impact its pricing and will cause unnecessary hardships for its franchisees during a period of economic weakness.
“Franchisees in the UK feel strongly that the finding of the tribunal is wrong and will continue to robustly challenge it with further appeals.”
It’s not the first time HMRC has been involved in a lengthy battle over the VAT status of food.
HMRC was uncomfortable with its classification of the Jaffa Cake as a cake, liable for no VAT. Having re-classified it as a biscuit which could have VAT put on, McVities appealed.
The company won, citing evidence that their product was the size of a biscuit and packaged like a biscuit.
Chief among the tribunal’s findings was the fact that when left out the Jaffa Cake would go hard like a cake – not soft like a biscuit.