Sub One Limited T/A Subway v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Arnold |
| Neutral Citation | [2012] UKUT 34 TCC |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,3 October 2012 |
| Date | 03 October 2012 |
| Published date | 01 December 2016 |
[2012] UKUT 34 TCC
Appeal number
FTC/27/2011
Value Added Tax – zero-rating – Value Added Tax Act 1994 Schedule 8 Part II
Group 1 Note (3)(b)(i) – food – toasted sandwiches and meatball marinara –
whether heated for the purposes of enabling it to be consumed at temperature above
ambient air temperature – whether legislation and/or interpretation and/or
application thereof infringed principle of fiscal neutrality – whether FTT findings
irrational – application to adduce further evidence
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
SUB ONE LIMITED T/A SUBWAY
Appellant
- and –
THE COMMISSIONERS FOR HER
MAJESTY’S REVENUE AND CUSTOMS Respondents
Tribunal: The Hon Mr Justice Arnold
Sitting in public in London on 23-25 July 2012
Philippa Whipple QC, Andrew Young and Isabel McArdle, instructed by Dass Solicitors,
for the Appellant
Melanie Hall QC, Owain Thomas and Ewan West, instructed by the Solicitor for HM
Revenue & Customs, for the Respondents
© CROWN COPYRIGHT 2012
Approved decision
Sub One v HMRC
Draft 8 October 2012 17:18 Page 2
MR JUSTICE ARNOLD:
Contents
Topic Paragraphs
Introduction 1-4
European law 5-40
European legislation 5-9
General principles of European law 10-20
Fiscal neutrality 11-14
Objective assessment 15
Primacy of European law 16
Marleasing 17
Procedural autonomy 18
Effectiveness 19
Equivalence 20
The CJEU’s jurisprudence with regard to Article 110 and
similar provisions 21-40
General 22-27
Interplay with the principle of fiscal neutrality 28-40
Domestic legislation 41-42
Initial comments on Note (3)(b)(i) 43-51
Pimblett and its progeny 52-72
Can Note (3)(b)(i) be interpreted compliantly with European law? 73-84
Application to the present case 85-91
What is the consequence of the inconsistent decisions? 92-107
Goods or services? 108-110
Irrationality 111
Application to adduce further evidence 112-114
Conclusion 115
Introduction
1. This is an appeal from a decision by the First-Tier Tribunal (Tax) (Tribunal
Judge Michael Tildesley OBE, Marilyn Crompton and Susan Stott FCA) (“the
Tribunal”) dated 14 October 2010 [2010] UKFTT 487 (TC). By its decision
the Tribunal dismissed the Appellant’s appeal against HMRC’s decision to
treat supplies of toasted sandwiches known as toasted Subs and meatball
marinara as falling within Schedule 8 Part II Group 1 Note (3)(b) of the Value
Added Tax Act 1994, and hence as being standard-rated rather than zero-rated
for the purposes of VAT. The Appellant, which is now in liquidation, formerly
carried on business as a franchisee in the Subway chain. The appeal to the
Tribunal was one of what I was told are now over 1200 appeals from Subway
franchisees challenging the correct VAT treatment of such supplies. On 1
February 2010 the Tribunal directed that the Appellant’s appeal be treated as
the lead appeal in accordance with rule 18(1) of the Tribunal Procedure (First-
Tier Tribunal)(Tax Chamber) Rules 2009.
Approved decision
Sub One v HMRC
Draft 8 October 2012 17:18 Page 3
2. The issues before the Tribunal were (1) whether the toasted Subs and meatball
marinara were above ambient air temperature at the time of the supplies within
Note (3)(b)(ii), and if so (2) whether they had been heated for the purposes of
enabling them to be consumed at a temperature above ambient air temperature
within Note (3)(b)(i). In a careful and detailed decision running to 194
paragraphs (not including two appendices) the Tribunal answered both
questions in the affirmative. There was little or no dispute before the Tribunal
as to the relevant law. In relation to issue (2), it was common ground that the
test was a subjective one: see the Tribunal’s decision at [4], [115], [126],
[133], [138] and [179].
3. The Appellant does not challenge the Tribunal’s conclusion on issue (1), but it
does challenge its conclusion on issue (2). The Tribunal gave the Appellant
permission to appeal on the sole ground that, although the Tribunal identified
the correct legal test, it went on to ask itself the wrong question. On a further
application to the Upper Tribunal, the Appellant was given permission by Sir
Stephen Oliver QC to appeal on two further grounds. The first is that the
Tribunal reached conclusions on the evidence which were irrational. The
second is that the Tribunal’s conclusions give rise to a result that is in breach
of European Union law because (a) there is inequality of treatment as between
the Appellant and other traders making objectively similar supplies and (b) the
Appellant’s supplies were not of services, but of goods. At the hearing of the
appeal, the principal focus of counsel for the Appellant’s argument was limb
(a) of the second additional ground of appeal, although she maintained the
other grounds.
4. It should be noted at the outset that, in response to the second additional
ground of appeal, HMRC served a Respondents’ Notice in which they went a
considerable way towards conceding that the test applied by the Tribunal did
not comply with European law. As I shall explain below, the result of the
stance adopted by both parties is to require this Tribunal to consider for the
first time the correct approach to Note (3)(b)(i) having regard to applicable
European law notwithstanding the existence of a substantial body of domestic
case law on Note (3)(b) going back to 1987.
European law
European legislation
5. Article 4(3) of the Treaty on European Union (“TEU”) provides inter alia:
“The Member States shall take any appropriate measure,
general or particular, to ensure fulfilment of the obligations
arising out of the Treaties or resulting from the Act of the
institutions of the Union.”
Essentially the same provision was previously to be found in Article 5 (later
Article 10) of the European Community Treaty (“TEC”), and before that in
Article 5 of the Treaty of Rome.
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