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Source: Leon Farrell/Photocall Ireland
THE SUPREME COURT today ruled that sandwiches made by Subway contain too much sugar to legally be considered bread.
The ruling today arose from an appeal from Bookfinders Ltd, a Subway franchisee, which claimed that it should not have to pay VAT as many products it sells are “staple foods” and should attract a 0% VAT rate.
However, the five-judge court ruled that the sandwiches must attract a rate of VAT due to its sugar content.
The law states that for bread to be considered a “staple product” and not attract VAT, it “shall not exceed 2% of the weight of flour included in the dough”. Subway’s bread has a 10% ratio.
This appeal arises from a claim submitted to the Revenue Commissioners by Bookfinders Ltd in December 2006. In the claim, the Subway franchisee sought a refund for VAT payments made from the period January/February 2004 to November/December 2005 at a rate of 9.2%, which it claimed should instead have been subjected to 0% VAT.
The court ruled “to exclude the bread used by the appellant in their sandwiches from being considered as bread under para. (xii) of the Second Schedule, as the sugar content in the bread exceeded the percentage allowed in the Schedule.
“The Schedule excluded bread from the 0% rate where any of a number of specified ingredients exceeded the allowed percentages.”
Bookfinders argued that all of the ingredients if included, would have to have exceeded the allowed percentage in order to fall outside the 0% rate (and not just the sugar) and into the 13.5% rate. The judges rejected this argument also, agreeing that it was clear that once the allowed percentage was exceeded for any one ingredient, the bread lost the 0% rate.
The franchisee also argued that certain VAT rates applied to cooked products and cold products which had subsequently been heated. It argued that only cold tea and coffee which had been heated fell under the 13.5% rate, while tea and coffee which was prepared hot came under the 0% rate.. The Court similarly rejected this argument.