THE family which owns one of Scotland's biggest Subway franchises is warning that the U-turn on the so-called pasty tax will restrict its expansion plans and lead to higher prices for consumers.

Brothers Wahid and Shahid Sadiq were the first to introduce the sandwich chain to this country when they opened their first outlet in 1998.

They now operate 35 stores across the west of Scotland and employ around 300 people.

However, they are angry that 20% VAT will still apply to toasted sandwiches but not to pasties, sausage rolls and other baked goods following the Westminster Government's backtracking on its original decision.

That means as long as hot takeaway food is cooling naturally or served straight from the oven it will not have the levy added to it.

Shahid told The Herald he and other Subway owners across the UK just wanted a level playing field to compete with other high street food outlets.

He said: "We have been paying tax on the products for a long time and we had hoped the tax the Government were introducing would level the playing field.

"We just want parity. Our sandwiches come out and we put salad on them and they cool down.

"It is all to do with the cooling process but I'm not sure how different ours is from sausage rolls coming out of an oven. It is hard enough getting people in the door and spending in a recession but we are now going to have to consider putting up prices and passing this tax on to customers.

"We had been planning to hold on until October 1, when the tax was due to come in, as we thought everyone else would have to increase as well."

The brothers, whose trading company is called Venturaone Restaurants and has a turnover of more than £8 million, hope the Government will get rid of the tax on toasted sandwiches.

They also intend to meet with local political representatives to try to bring the issue into the public domain.

Wahid said: "It would appear that the intention of the Government is to unfairly continue to tax supplies of toasted sandwiches at 20% while pasties, sausage rolls and other baked goods which fulfil the same purpose are exempt.

"The last thing I am calling for is for VAT to be re-instated on pasties but we must have fairness.

"The most sensible solution would be to zero-rate all hot and toasted products, just as they do in Europe."

Shahid added: "Cutting this tax for us would encourage all Subway owners to reinvest in their businesses. It would mean more stores and more jobs in the Scottish economy."

In Scotland there are around 150 Subway stores and those employ more than 1500 people.

Chancellor George Osborne announced the pasty tax in his Budget earlier this year but was forced into a U-turn in May following cross-party criticism from MPs, bakers andthe public.

The Treasury had tried to implement the policy to correct what it saw as an anomaly where take-away foods – such as fish and chips or curries – are taxed but pasties were not.

The tax will still apply to areas such as supermarkets selling rotisserie chicken.

A Treasury spokesman said: "At the Budget, we announced proposals to address anomalies that have built up in the VAT system and have led to similar products being taxed differently.

"The changes mean a clearer and more consistent system in which VAT will be consistently applied to food that is actively kept hot, but not that which is allowed to cool naturally.

"This is the case whether the product is a sandwich or a sausage roll."

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