Independent VAT Consultant
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Kid creating something from scratch
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VAT: HMRC creates confused mess with craft box

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A company that produced three sizes of its craft materials product successfully challenged the different VAT treatment applied by HMRC on the petite version.

20th Feb 2020
Independent VAT Consultant
Columnist
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The company concerned was Dodadine Ltd trading as toucanBox (TC07505).

It sold three products designed for children aged between three and eight, which consisted of reading matter and materials for craft activities, linked to a particular theme, eg kings and queens.

Crafty challenge

In the case of “super” and “grand” packages, which sold for £19.90 and £12.90 respectively, HMRC accepted there was a mixed supply of a zero-rated book and standard rated craft activities, so output tax was apportioned.

However, with the “petite” product, the book was replaced by a magazine so that it could slide through a letterbox when delivered to the customer, and the package was sold for £5.95. HMRC challenged the view that the “petite” was a mixed supply and assessed output tax, treating it as wholly standard rated.

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Replies (4)

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By flightdeck
20th Feb 2020 10:54

Yes, not a good day for HMRC. They made a subjective assessment and tried to ride roughshod over the company.

Thanks (1)
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By listerramjet
20th Feb 2020 11:16

There is an important question for HMRC and Government to answer here. What are the public policy grounds for HMRC to act in such an irrational if not entirely absurd way?

Thanks (3)
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By chasmeehan
20th Feb 2020 11:50

Its clear that this was not a straighforward decision for the FTT given its carefully argued decision, but ultimately "what the customer thinks they are buying" and the firm's careful fact based assessment supported by the customer survey won out. In many mixed supply cases the value of the market is often a driver in a decision to appeal but frankly it looks like a "maybes aye, maybes no" or "teacakes" case with the result being fact specific in a limited market segment and no big issue of principle to motivate a policy related appeal.

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By scrasey
20th Feb 2020 14:34

typical of the prats at HMRC. no common sense, no appreciation of the real world and instead of insuring that tax is collected correctly, are simply trying to maximise tax revenues. and still ever few years the pillock at the top of this entirely dysfunctional organisation is made a dame or a knight. the latest deluded soul thinks he's joined the best HMRC in the world. sums it up really.

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