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Supreme Court rejects Subway appeal request

7th Jan 2015
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The Supreme Court has refused permission for a Subway franchisee to appeal the Court of Appeal's decision to reject a plea concerning a previous Upper Tier Tribunal decision that heated food products should be charged VAT.

In the case of Sub One Ltd the UTT upheld HMRC's view that two hot food products should be standard, rather than zero-rated for VAT purposes.

The Yorkshire franchisee argued in October 2012 that her business had failed because she was required to charge VAT on the items, where other retailers were not. 

Nearly 1,200 Subway outlets were waiting to bring appeals against HMRC should the challenge have succeeded, according to the judgement.

The franchisee then recently brought the case to the Court of Appeal, and argued against the rulings, saying that the differing VAT treatment of food products at Subway compared to that of other vendors breached EU fiscal neutrality principles.

However it lost this case and the appeal was dismissed.

The Supreme Court said the legal issue in the case "is whether the relevant tax legislation was compatible with EU law, and in particular whether it complies with the principle that legislation imposing VAT should be objective in character and legally certain.

"If the legislation is found to be EU law compliant, the issue is whether the approach previously taken the UK courts and tribunals represents an "entrenched attitude" to the legislation and whether the fact that competitors of the appellant received a benefit from an earlier misapplication of the legislation amounted to a windfall arising from an "unlawful act", with the consequence that the appellant was not entitled to be treated in the same way."

The Supreme Court order reads: "The Court ordered that permission to appeal be refused because the application does not raise an arguable point of law. In relation to the point of European Union law said to be raised by or in response to the application it is not necessary to request the Court of Justice to give any ruling, because the Court's existing jurisprudence already provides a sufficient answer." 

Therefore the Court of Appeal's judgement still stands.

Replies (8)

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By qad999
08th Jan 2015 00:40

there are madmen....

who are running the asylum .... as hard working businesses crash to the floor around them

eventually there will be but one single taxpayer in the UK ... supporting the whole benefit system ... and who, one day, will realise what is going on . and will surely say ...  "f**k this for a game of soldiers.. I am out of here "

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Replying to CJaneH:
By stepurhan
08th Jan 2015 08:51


qad999 wrote:
who are running the asylum .... as hard working businesses crash to the floor around them

eventually there will be but one single taxpayer in the UK ... supporting the whole benefit system ... and who, one day, will realise what is going on . and will surely say ...  "f**k this for a game of soldiers.. I am out of here "

Rather than making over-dramatic statements, perhaps you could address what you think is wrong with the decision.

Cooked food being standard rated is a long standing part of UK VAT law. If Subway sandwiches are deliberately heated up, then they are technically cooked food. The "ambient temperature" argument that they tried to appeal on is a spurious one. Above ambient temperature quite obviously means that the product has been heated in some fashion, because otherwise the product would be the ambient temperature (whatever that may be at any given location at any given time). If a particular temperature was set as the test instead, then a particularly warm summer's day (unlikely as that is in the UK) could suddenly make all food standard-rated.

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By Vaughan Blake1
08th Jan 2015 11:12

Spot the Daily Mail reader!

Seems like a logical and rational decision to me.  As an occasional Subway diner (when funds permit!) I would not want a cold baguette and I want my cheese melted by heat, not some form of chemical reaction.

Although I am not a lover of franchises generally, the Subway business model should provide a workable business.  If yours comes "crashing to the floor", it is probably not as a result of VAT on hot food.

As an aside, I wonder if the main Subway franchisor funded the case?  I suspect that they would only have done so if they saw it as a sustainable argument, interesting to know.

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By Taxbreak
08th Jan 2015 15:46

Is this news or history?

The link in the original article suggests that the decision of the Court of Appeal was handed down on 10 June 2014 so it is not clear that we have any news?

Or perhaps the appellant has sought leave to appeal to the Supreme Court, which has been turned down - but, if so, this point is not clear in the article.

Perhaps the author or Accounting Web could clarify?

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By Rachael White
08th Jan 2015 15:57


Thanks for spotting that Taxbreak! I had omitted that the Supreme Court had taken a decision to refuse the appeal by mistake. It's included now. 


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By Taxbreak
08th Jan 2015 16:30

No worries!


The update reads much better.


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By Les Howard
10th Jan 2015 13:22

Subway Appeal

I have already attended VAT inspections at Subway franchisees, so HMRC are starting to enforce assessments going back over several years.

Most Subway Appeals are stood over for 60 days after the final decision (which was dated mid-December), so they have until February to decide their course of action.

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By Patrick Selley
10th Jan 2015 17:23

Action v Subway

Now that the appeals process seems to have reached its conclusion I would be interested in hearing from any Subway Franchisee wanting to consider whether the Subway business model contained actionable mis representations. This has to be at least a distinct possibility. It would seem very unfair for the franchisees to absorb this burden exclusively. 

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