The firm, which was named the biggest bakery franchisee in British Baker's BB75 list, will fight to appeal against a ruling made two years ago that it must add tax to its toasted sandwich products.
Dipak Jotangia, a partner at Dass Solicitors, is handling the case for the firm and told British Baker: “What Subway is asking for is equal tax treatment to other bakery and food-to-go businesses selling similar products. That is the heart of the company’s case – if you go to another bakery outlet which is located two doors down and it sells a toasted panini, then that is zero-rated. It would be hard for Subway to compete with that.
“It’s difficult to compete in a market where consumers have a choice of certain goods, and your business’ products could be so much more expensive because of the tax, or the company has to compensate and pay for the VAT. With Subway’s case, it is all about fairness and nothing else.”
Subway’s fight to have its toasted subs zero-rated dates back to 2010, when Kay Mulligan, one of the company’s franchisees in Huddersfield, put forward the case explaining the sandwiches needed to be heated to comply with food legislation.
Subway’s Meatball Marinara sub is one of the products that has been included in the appeal, because the firm claims that if the heating process was taken away, the filling would be too “thick and glutinous”. The firm hired a specialist in surface metrology to measure the temperature of its products and shops.
A judge ruled in favour of the tax authorities two years ago, forcing Subway to add 20% tax onto its toasted sandwich products.
Jontangia added: "Greggs did a fantastic job of lobbying against the proposed 20% tax on its sausage rolls and pasties. However, Subway now cannot compete with the likes of Greggs because it has no choice but to charge VAT. So there is an inequality of treatment taking place.”