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VAT: Mixed supplies cause child car seat confusion

Should the fee to hire child car seats along with car hire agreement be subject to 5% VAT as a separate supply? The FTT agreed it was a separate supply, but this appears to contradict earlier decisions.

7th Aug 2020
Independent VAT Consultant
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Shot of an adorable little girl being secured in her car seat by her mother
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The subject of mixed supplies reared its head as a practical issue in the hospitality industry following the recent VAT cut from 20% to 5%. For example, when a ‘pie and pint’ offer is sold by a pub for a single price it must apportion the output tax between 5% VAT on the pie and 20% VAT on the alcoholic drink – it is a mixed supply. 

Mixed supply challenges have confused advisers, HMRC, judges and clients for decades, despite the landmark 1999 case heard in the ECJ: Card Protection Plan Ltd C349/96

The waters have been muddied further with a recent case heard in the FTT.

Child car seat

Imagine the following situation: it will cost you £25 per day to hire a car. You have a child under seven so, legally, you need a child seat in the car. You pay an extra £10 per day to hire a seat from the hire company. It is an optional fee – in fact, 75% of hirers with children don’t need it because they have their own seat. 

Has the car hire company made a single supply of a “car with child seat”, ie all subject to 20% VAT? Alternatively, has it made two supplies; one for car hire with 20% VAT, and one with the optional £10 child seat charge qualifying for 5% VAT as per Group 5, Sch 7A, VATA 1994

The child seat question was considered in the case of Europcar Group UK Ltd (TC07733) and involved VAT of £631,178. 

Hiring skates

Here is a similar example: you take your young daughter to an ice rink and pay £20 for a skating session. You make a separate and optional payment of £10 to hire skates for her. Hire of children’s clothing qualifies for zero-rating (VAT Notice 714, para 9.3). Will you pay 20% VAT on £20 or on the full cost of £30, ie is it a single supply of a skating session for two people or mixed supply of skating plus hire of a child’s skates? 

HMRC approach

An important question is to consider whether each supply is an aim in itself, or is there one main supply with others being incidental. 

In the Europcar case HMRC concluded that “what has been supplied is car hire in which all intended passengers can be transported safely and legally.” The aim of the customer was not to hire a child seat for the car.

The same argument was made in the case of Ice Rink Co Ltd UKUT0108, that there was a single supply of “skating with skates” and not two separate supplies.

The decision

The judge disagreed with HMRC: the child car seat was an optional extra and customers had “freedom of choice” whether they paid for this extra benefit. The two supplies were “economically distinct” and the contract gave the customer “a genuine economic choice as to whether to hire a car seat or not.” The appeal was allowed. 

Judges confusion 

The FTT case involving Ice Rink Co Ltd was heard in 2017 and also went in favour of the taxpayer. But the UT hearing of that case muddied the waters in 2019, when it said the relevant issue was the viewpoint of the customer who paid for both skates and rink hire as a single package, not a typical customer who might not need the skates. The UT decided that the FTT had erred in law and sent it back to the FTT. 


In my view, the child’s skates and child car seats arrangements are identical and it is worrying that the courts have given different views. There are no easy answers. 

However, a key tip is to remember that separate pricing of supplies and the availability of optional extras does not always mean there are multiple supplies, despite the latest decision. 

Going back to pubs, a measure of gin costing £3.50 with an extra 50p charged for a splash of tonic is still a single supply of an alcoholic drink for £4. Cheers!  

Replies (2)

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By richard thomas
07th Aug 2020 14:43

As the judge in the Ice Rinks FTT case it is not appropriate for me to comment on the article, but I would like to correct one misapprehension. The FTT decided in Europcar that there were two supplies, so one could be reduced-rated. The FTT in Ice Rinks also decided that there were two supplies so that one could be zero-rated. The Upper Tribunal decided that in arriving at that decision the FTT approached the issue incorrectly and so it found that the decision could not stand: but it did not, as it could have, remake the decision to say that there was only one supply. Instead it remitted it back to the FTT to find further facts and to make its decision anew on the basis of the facts so found.

So as the decisions currently stand they both go the same way, but either or both may change, depending on whether HMRC appeal Europcar and what the FTT decides after the remitted hearing in Ice Rinks (a decision which will of course also be potentially appealable). No Court or Tribunal has given a differing view.

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By Paul Crowley
08th Aug 2020 22:03

It appears that HMRC VAT looks at all times and in all places to increase the sum of output VAT. If HMRC operates the tax it should be reasonable to expect them to be correct. Why with so much experience do they keep getting it wrong?

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