Subway sandwiches will no longer be served in “bread” in Ireland after the Supreme Court ruled the retailer’s recipe contains too much sugar.
Judges found that the rolls have too high a sugar content to meet the legal definition of bread in a case about how the foodstuff is taxed.
An Irish franchisee of the US company previously claimed it should not pay VAT on its heated subs because they should be deemed a “staple product”.
But Ireland’s highest court decided the amount of sugar in the bread meant they cannot be taxed as such, and cannot be sold with a zero rate.
Ireland’s VAT Act of 1972 stipulates ingredients in bread such as sugar and fat should not exceed two per cent of the weight of flour in the dough.
Irish law considers bread a staple food and it can be sold therefore with a zero rate of tax. The act is also designed to clearly distinguish between bread and other products baked from dough, to which sugar and other ingredients might be added, Mr Justice Donal O’Donnell explained to the court.
The appeal by Bookfinders Ltd., a Subway franchisee based in County Galway, was dismissed by five judges who concluded the sugar content of around ten per cent of the flour – for both white and wholegrain rolls – was too high to meet the threshold.
As such, the business will now be subject to a tax at 13.5 per cent.
The court ruling said: “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.
“Since that argument has been rejected, this subsidiary argument must fail.”
The case first made headlines in 2006, when Ireland’s tax authority refused Bookfinders’ request for a refund on VAT payments made between 2004 and 2005.
After an appeal commissioner upheld the decision, Bookfinders took its case to the High Court. The company lost the case, and went through the Court of Appeal, where it was also unsuccessful.
A spokesperson for Subway told i: “Subway’s bread is, of course, bread. We have been baking fresh bread in our stores for more than three decades and our guests return each day for sandwiches made on bread that smells as good as it tastes.”