It is advertised as a “comforting, splodgilicious Sub with tasty meatballs”, but Subway’s Meatball Marinara sub could be about to cause the Government some serious indigestion. The Subway sandwich is set to be the subject of a High Court battle that could reignite the VAT pasty row that caused the Government such pain earlier this year. The case revolves around the heated Meatball Marinara “sub”, one of its most popular. If the tax authorities lose the case, it would be another blow to the Treasury and its attempt to close the VAT loopholes on food. The Subway sandwich is heated up before it is handed to customers, and in the eyes of the Treasury it is therefore “above ambient temperature” and liable for the full level of VAT at 20%. A test case was bought by a franchisee based in Huddersfield in 2010, who claimed that all of its toasted subs were heated in order to comply with food safety legislation. It argued that the heating process was needed to stop the Marinara sauce from being “thick and glutinous”. The franchisee’s legal team employed a professor of surface metrology (the measurement of heat and surface changes) to measure the temperature of the sandwiches and the “ambient” temperature of the shop. In 2010 a judge ruled in the tax authorities’ favour and Subway has been forced to carry on charging VAT on its toasted sandwiches. However, a group of more than 100 Subway franchisees is appealing the decision and the case will be heard at the Upper Tribunal for tax, in the High Court next month. Their solicitor, Dipak Jotangia, a partner at Diss Solicitors, said that the Government’s decision not to press ahead with the pasty tax gave them confidence they would win the appeal.
The Sunday Telegraph