And now for some news that is “hot off the press”, at least at the time of writing. Subway has lost its appeal against VAT being charged on its hot toasted subways and meatball marinara!
Some of you will recall the debacle a few months ago after the government announced a “pasty tax” in the budget. Basically, this said that hot pastry goods should be subject to standard rated VAT and defined a product as being hot if it was above the ambient temperature. The ambient temperature, of course, varies between the seasons, so this lead to the ludicrous situation that something that was hot, and therefore subject to VAT, in the winter would be cold in the summer, and therefore VAT free. The government saw sense and made the now famous pasty tax u-turn.
Subway were a little bit miffed at the resulting situation that people could buy what is effectively a hot lunch from a bakery without having to pay tax, whilst anyone wanting one of their hot toasties had to pay 20% VAT, and they therefore appealed this to the tax tribunal.
The tribunal ruled in favour of the VAT office on the grounds that the food was served hot as it was more attractive. This compares with the VAT on pasties, in that they are hot from being cooked and are then placed on unheated shelves to cool, meaning that their hotness is simply a result of their preparation.
At the time of writing it is not clear whether Subway will appeal this decision. As you may be aware, Subway is a franchise, and there are a large number of franchisees behind this appeal. Should they decide to do so it is therefore quite possible that they would be able to take this decision all the way to the European Court of Justice. Therefore, this story may not yet be over.
One thing is clear. At the time of writing it is hot toasties – 20% VAT, hot pasties – VAT free.
One other thing is clear. There is something drastically wrong with our tax system when, as one commentator put it, “still as clear as mud as far as I can see”, followed by another comment “I find the level of understanding of the intricacies of VAT legislation required simply to sell sandwiches ridiculous”. And so say all of us!
WatkinsonBlack are pleased to advise on these and other matters. They have considerable experience in these and other matters, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
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