High street sandwich chain Eat found itself picking up a rather expensive VAT bill last year after toasties lost out in the long-running pasty tax row.
In 2014, franchisees of rival chain Subway lost a Court of Appeal battle with the Treasury to force it to drop the 20 per cent VAT rate on toasted sandwiches as it had done with other hot savouries such as hot pasties and pies.
The ruling set a precedent for other chains. Eat’s latest annual accounts on Companies House shows that the company set aside £3.65m for VAT liabilities last year following the case ruling.
The company said the payment will be partly funded by £2.2m of additional loan notes subscribed for by its private equity owner Lyceum Capital.
The chain posted a turnover of £99.4m in the 12 months to 25 June 2015, up 5.8 per cent on the previous year.
However, it recorded a loss of £20.2m compared with £26.4m the previous year, in part due to the company embarking on a £13m refurbishment of its stores, the accounts filed by its parent company Villiers Topco show.