Subway loses legal challenge over VAT on hot food

Mr Justice Arnold has thrown out an appeal bid by a franchisee of sandwich chain Subway to challenge HM Revenue & Customs’ VAT policy on hot food.


The case was brought in the Upper Tier Tribunal by One Crown Office Row’s Philippa Whipple QC who led Isabel McArdle on behalf of franchisee Sub One.

In throwing out the case Arnold J handed victory to Monckton Chambers’ Melanie Hall QC, who was instructed for HMRC.

According to the judgment, 1,200 Subway outlets were waiting to bring appeals against HMRC should the challenge succeed.

At the heart of the dispute was whether Subway’s takeaway sandwiches that were heated before being taken away were above ambient temperature when later consumed and therefore liable for VAT.

“It’s perfectly clear that the toasted subs were heated for the purpose of enabling them to be consumed at above ambient temperature, and not for some other purpose,” the judge ruled, continuing: “Subs were in fact consumed at above ambient temperature. That would inevitably depend on how quickly they were eaten, which in turn would depend on how far the consumer carried them before eating them.

“Nevertheless, it seems clear that the majority of customers wanted the toasted subs warm, and thus appetising. They did not want cold pre-toasted subs, which would be much less appetising.”

The appellants, who were represented by Dass Solicitors partner Dipak Jotangia, also contended that inconsistent decision making by HMRC on which hot foods should be taxed and which should not had placed it at a competitive disadvantage because rivals were not under the same tax obligations.

However, Hall said that to make such an argument fell outside the scope of the appeal.

Arnold J stated: “I’m not persuaded that HMRC’s failure to appeal the adverse decisions in question [John Pimblett and Sons Ltd v Customs and Excise Commissioners [1988]] combined with its support for the tribunal’s decision in the present case has placed the United Kingdom in breach of the principles of fiscal neutrality or effectiveness.”

Legal line-up:

For the appellants Sub One trading as Subway: One Crown Office Row’s Philippa Whipple QC, instructed by Dass Solicitors partner Dipak Jotangia.

For the respondents HMRC: Monckton Chambers’ Melanie Hall QC, instructed directly.