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Sub One v HMRC

10 Oct 2012

Fiscal Neutrality – The Broader Implications of Sub One

The Decision of the Upper Tier Tribunal in Sub One is meatier than the sandwich which inspired it and, depending upon your tastes, is just as satisfying.

In a keenly awaited Decision, the Upper Tier Tribunal rejected a challenge made by more than 1,200 food outlets to the pre-Finance Act 2012 legislation which zero-rated hot takeaway food. The taxpayer’s challenge was based upon a number of different grounds. First, that the 1998 Court of Appeal judgment in John Pimblett and Sons Ltd v Commissioners1 was contrary to EU law and, accordingly, should not be applied by the Tribunal. Second, that the legislation was, in any event, incapable of being construed or applied consistently with the principle of fiscal neutrality. Third, that HMRC itself was liable for the inconsistent decisions that have been made by the courts and tribunals since Pimblett and, finally, that the zero rating legislation was ultra vires the VAT Directives since, following the case of Manfred Bog, HMRC wrongly classifies supplies in the course of catering as supplies of services when they are supplies of goods.