SANDWICHES from Subway contain too much sugar to be considered bread, according to a new Irish court ruling.
Ireland’s Supreme Court made the decision this week after one Subway franchise-holder challenged whether VAT was due on the sandwiches given they are made from bread.An Irish judge has ruled that Subway’s bread contains too much sugar to be considered bread for VAT purposes [/caption]
Under Ireland’s VAT Act 1972, food that is considered to be a “staple”, such as bread, attracts a 0% VAT rating.
But the five-judge court ruled that bread used by the popular fast food chain contains too much sugar to be considered to fall under the definition of bread and therefore attracts the reduced rate of VAT at 13.5%.
To attract a 0% VAT rating ingredients in bread, such as sugar and fat, cannot exceed 12% of the weight of flour in the dough.
The particular case was brought Irish Subway franchisee, Bookfinders Ltd, based in Tuam, Co Galway, following a 2006 decision by Ireland’s Revenue refusing the company a refund for VAT payments.
Bookfinders argued it was due a refund on tax paid between early 2004 and late 2005.
But Mr Justice Donal O’Donnell said the clear intention of the Act is to distinguish between bread as a “staple” food and certain other baked goods made from dough.
VAT is a tax on businesses though and it’s up to them whether or not to pass on these charges to customers in the the price they pay.
It’s unclear if prices will change for Subway fans in Ireland as a result of this ruling – The Sun has asked Subway to confirm.
It’s worth pointing out that while this ruling was made in Ireland’s highest court it doesn’t apply to the UK, which has its own separate VAT system.
In the UK, whether food attracts VAT depends on whether it’s served hot or cold and on whether it’s served to eat-in or takeaway.
Broadly speaking, in the UK most food served to be eaten in store incurs VAT, as do hot takeaways. Cold takeaways, however, are VAT-free.
The Sun has asked Subway if it charges VAT when it toasts sandwiches and whether this is then passed on in the form of higher prices.
We’ll update this story if we get a response but back in 2017 the chain did trial passing on the VAT charge to UK customers who ordered hot Subs to takeaway.
We’ve also asked Subway if it uses the same bread in the UK as it does in Ireland.
In a statement on the court ruling the fast-food chain said: “Subway’s bread is, of course, bread.
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“We have been baking fresh bread in our stores for more than three decades and our guests return each day for sandwiches made on bread that smells as good as it tastes.”
In the UK, VAT has been slashed from 20% to 5% for businesses in the hospitality and tourism industries until January 12, 2021 under coronavirus measures first announced in chancellor Rishi Sunak’s mini-Budget.
KFC, McDonald’s and Wetherspoons are among the high street chains to pass on these VAT savings to customers.