A court has decided that fast food chain Subway’s signature sandwiches are not made with real bread, in a bizarre ruling.
An appeal at the Irish Supreme Court has concluded by ruling that the “bread” in Subway sandwiches cannot be legally defined as bread, for tax purposes, because it is too sugary.
Under the Value-Added Tax Act 1972, staple food items attract a rate of zero VAT. The act stipulates that an item of food can be considered to be bread only if ingredients such as sugar, fat and bread improver account for two per cent or less of the total amount of flour used in the dough.
What was the ruling?
The Supreme Court ruled that Subway’s heated sandwiches did not qualify as bread under the legislation, as sugar makes up 10 per cent of the total amount of flour in the dough.
“The argument depends on the acceptance of the prior contention that the Subway heated sandwich contains ‘bread’ as defined, and therefore can be said to be food for the purposes of the Second Schedule rather than confectionary,” the court ruled.
“Since that argument has been rejected, this subsidiary argument must fail.”
This was the case for both white and wholegrain rolls, meaning all six types of roll offered by Subway do not meet the legal definition of bread.
Following the ruling, the rolls used by Subway will attract a 13.5 per cent rate of VAT.
Why is this happening?
The case originates from a decision made by the Irish tax authority in 2006, to refuse the request of a Subway franchisee, Bookfinders, to refund VAT payments made by the company on several of their products, including heated sandwiches.
Bookfinders appealed the initial decision and the case has now also been heard in the High Court and Court of Appeal, where the original decision was upheld on each occasion.