Subway sandwiches contain ‘too much sugar’ to be legally considered bread, Supreme Court rules

THE SUPREME COURT today ruled that the sandwiches made by Subway contain too much sugar to be legally considered bread.

Today’s ruling stemmed from an appeal from Bookfinders Ltd, a Subway franchisee, which stated that it should not have to pay VAT as many products it sells are “staples” and should have a 0% VAT rate.

However, the five-judge court ruled that the sandwiches must have a VAT rate due to their sugar content.

The law establishes that for bread to be considered a “basic product” and not attract VAT, “it must not exceed 2% of the weight of the flour included in the dough”. Subway’s bread has a ratio of 10%.

This appeal arises from a claim submitted to the Commissioners of Revenue by Bookfinders Ltd in December 2006. In the claim, the Subway franchisee requested a refund for VAT payments made from the period January / February 2004 through November / December 2005 at a rate of 9.2%, which, he claimed, should have been subject to 0% VAT.

The court ruled “to exclude the bread used by the appellant in his sandwiches from being considered bread under para. (xii) of the Second Schedule, since the sugar content in the bread exceeded the percentage allowed in the Schedule.

“The List excluded bread from the 0% rate when any of a number of specified ingredients exceeded the allowable percentages.”

Bookfinders argued that all ingredients, if they had been included, would have had to have exceeded the allowed percentage to fall outside of the 0% rate (and not just sugar) and enter the 13.5% rate. The judges also rejected this argument and agreed that it was clear that once the percentage allowed for any ingredient was exceeded, the bread lost the 0% rate.

The franchisee also argued that certain VAT rates were applied to cooked and cold products that had subsequently been heated. It held that only iced tea and coffee that had been heated fell below the 13.5% rate, while tea and coffee that were brewed hot were subject to the 0% rate. The Court also rejected this argument.