GSK and Subway fall foul of tougher VAT rules

By Rod Addy

- Last updated on GMT

GlaxoSmithKline (GSK) and Subway are the latest food industry victims to fall foul of VAT rules after failing tribunal appeals and must now decide whether to take their battles further.

A tribunal ruling published in September asserted that Lucozade Sport Isotonic Drink and Drink Mix were liable for VAT, against GSK's claim that they were not 'beverages', so should be zero VAT rated.

In a further decision released last month, a tax tribunal rejected about 250 claims from Subway franchisees that its toasted Sub sandwiches and meatball marinaras should be zero rated for VAT. They argued this was because they did not fall into the strict definition of hot products.

Fast food chain Subway said the latest decision was a u-turn for Her Majesty's Revenue and Customs (HMRC), which had previously said toasted sandwiches should not be taxed. Subway said: "Subway franchisees in the UK feel strongly that the finding of the tribunal that the toasted range of Subs are standard rated is wrong and will continue to robustly challenge it with further appeals."

GSK: Disappointed

GSK was "disappointed"​ with the ruling and was "considering our course of action".

The rulings follow comments last month from food firms and their lawyers that HMRC was taking a substantially tougher line on VAT on food.

"In the past few months there has been a real clampdown on people who make tax errors,"​ said Hannah Dobson, VAT director at financial services group Smith & Williamson.

Related topics: Chilled foods, Drinks, Legal

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