The popular US fast food chain Subway has announced that it will now start charging extra for its toasted sandwiches as a result of increased VAT costs.
The costs are themselves the result of recent VAT rulings, which have reinforced the position on applying VAT to the sale of hot sandwiches – a legacy of the ‘Pastygate’ scandal.
Back in 2012, former Chancellor George Osborne announced a 20 per cent VAT charge on cooked takeaway foods, such as sausage rolls and pasties, which came to be known as ‘Pastygate’.
A public outcry after the announcement in the Budget forced Mr Osborne to withdraw the pasty tax but a tax on hot sandwiches was rolled out instead.
In order to avoid this additional tax cost, Subway initially re-branded their toasted subs as ‘hot bread sandwiches’. However, HM Revenue & Customs quickly caught on to this ruse and said that it must charge the full rate of VAT.
A spokesman for Subway has said: “Since changes to VAT in 2012 (the pasty tax) Subway has repeatedly tried to challenge the law in order to protect the customer.
“Subway franchisees have been absorbing the VAT cost, charging a single price for food, whether hot or cold or eat-in or take-away.”
But the chain has now said the costs will have to be absorbed by customers and it will start charging extra for its toasted treats.
“The dual-pricing menu is similar to what customers see on other high-street chain menus, which ensures that customers pay the lowest price for products which do not attract VAT,” added Subway’s spokesman.
VAT is a complex area of tax and rates may vary from one product or service to another. With this being the case, it makes sense to consult a VAT specialist if you have a particular query in regards to the services and goods you offer. To find out how the team at UK VAT Advice can help, please contact us.