Toasted sandwiches are standard-rated “hot food” for VAT purposes

21 August 2014

In Sub One Ltd (t/a Subway) v HMRC[1] the Court of Appeal has upheld the decisions of both the First-tier Tribunal (FTT) and the Upper Tribunal (UT) that toasted sandwiches and "meatball marinara" are "hot food" and therefore, for VAT purposes, amount to standard-rated supplies. This decision has implications for a number of fast food outlets.


Under the VAT legislation in force at the relevant time, food supplied in the course of catering, which specifically included supplies of hot food for consumption "off premises", fell outside the definition of a zero-rated supply. The appellant company therefore faces the prospect of a bill for 20% of the historic sales of such food items. Hot food, for these purposes, meant food heated to enable it to be consumed at above ambient air temperature and provided to the customer at such temperature.

FTT's decision

The First-tier Tribunal, in reaching its decision, had applied the subjective test set down in the Court of Appeal decision in John Pimblett and Sons Ltd v Customs & Excise Commissioners[2] and had therefore considered the state of mind of the chief factual witness for the appellant company. In doing so the FTT decided that the appellant’s dominant purpose for heating the sandwiches and meatball marinara was to enable such food to be consumed whilst hot. Both foods therefore fell within the category of (standard-rated) supplies of hot food within note 3(b) to Group 1 of Schedule 8 to the Value Added Tax Act 1994.

UT's decision

The UT, although reaching the same conclusion, held that the FTT had incorrectly applied a subjective test. According to the UT, the decision in Pimblett was inconsistent with EU law, and the correct test was an objective one.

Court of Appeal's decision

The Court of Appeal agreed that an objective test was required, but one that looked for a common intention, found to exist on the facts, of both supplier and customer that the food be eaten hot. The appellant’s primary argument before the Court was that inconsistent VAT treatment of food (on the basis of the Pimblett decision and in particular with respect to its competitors) infringed the EU principle of fiscal neutrality. On this argument the Court held that the principle of fiscal neutrality does not extend to an EU taxpayer’s right to be treated the same way as other taxpayers who had (wrongly) obtained a tax windfall due to misapplication of the law.

The Court of Appeal expressed some sympathy for the appellant, noting that the complexity of the law in this area did EU law "no credit".


The decision is of particular importance as the appellant is one of many franchisees, each with their own appeals before the FTT on similar issues which have been stayed pending the outcome of this case.

It should be noted that, with effect from 1 October 2012, the UK VAT rules relating to hot food have been amended.

To read the judgment click here

The blog was written by Nigel Brook.

[1] [2014] EWCA Civ 773.

[2] [1988] STC 358.

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