How supplies should be combined or split has been at the heart of VAT for many years now. There have been many cases over the years, but a new Tribunal decision confirms we are still a long way from clarity in this area.
HMRC’s policy is set out in Revenue & Customs Brief 22/12 (published on 22 August 2012), which states that the supply of land (e.g. a stall) with other services (e.g. power) was a single supply of a standard-rated service. We reported on this here.
This was part of an HMRC policy trend of combining supplies which involved property. A few months later (on 22 January 2013), HMRC published Revenue & Customs Brief 02/13 which details the policy of standard-rating supplies of rooms which will be used for catering, even if the catering is provided by a different person.
However, on 13 February 2013 the decision was published for the case Antiques Within Ltd v Revenue and Customs ( UKFTT 089 (TC)) and this seems to fly in the face of HMRC’s policy.
The taxpayer was supplying stallholders with a space and other services (including staff to make sales, insurance cover and utilities). The Tribunal decided that the supply of staff to conclude sales in the stallholder’s absence was a separate and independent supply from the supply of the space itself.
The Tribunal distinguished the two supplies as follows:
16. … Neither of these quite distinct supplies can be seen as merely incidental to or ancillary to the other.
19. Another way of approaching the analysis of the transactions is to ask whether the supply of the sales facility could be omitted from the overall supply. The answer is yes. The sales facility gives the stallholder something above and beyond the mere supply of his space. It gives him the ability to sell his goods in his absence. This facility has to be seen as an aim in itself and not merely a means of better enjoying the supply of the space.
Nor is this an isolated case. On 12 October 2012, we reported here on the Goals Soccer Centres case. HMRC had argued that the hire of a football pitch (exempt) should be combined with the supply of league management services (standard-rated), with the resulting combined service being standard-rated. The Tribunal disagreed, concluding that there were two distinct supplies which should be taxed at different rates.
Although HMRC’s policy to combine exempt supplies of property with other services is firmly stated, it is far from clear that the policy is correct. A challenge is often worth considering.