VAT: mixed or single supply?

Determining the VAT liability of multiple supplies is fast becoming one of the most complex areas of VAT.  Examples range from delivery charges – and whether they should take on the VAT rate of the goods being delivered – to preliminary financial advice, and whether it should be exempt from VAT as part of a predominant supply of financial intermediary services.

Many cases have involved a determination of the VAT liability of mixed supplies.  Decisions have been released on the rental of property and cleaning services, airport car parking and travel on a bus to the terminal, computer parts provided as part of a service, credit card protection services, foodpacks and weight management services, to name but a few.

Now, however, we have been provided with a handy check list issued by the First-tier Tribunal in the case of Goals Soccer Centres PLC v Revenue and Customs Commissioners ([2012] UKFTT 576 (TC), published on 27 September 2012), which provides a useful summary of the various factors to consider when determining whether there is a single supply or mixed supplies.

The check list is an aide to determining the VAT liability when two or more supplies which ordinarily incur different rates of VAT are supplied together.  It is then a question of whether there is one supply for VAT purposes and, if there is one supply, what the single rate of VAT is.  This is important both in terms of identifying the correct rate of VAT after a transaction and when planning a client’s business processes.

In Goals Soccer Centres, a football league had been established and the taxpayer supplied the teams with a football pitch (exempt from VAT) and with league management services (standard-rated).  Separate contracts and separate prices were agreed for these two supplies.  However, HMRC considered that the two supplies should be combined as a single supply, which HMRC taxed as the standard-rated supply of “participation in a sports competition”.

The taxpayer appealed and, in coming to its decision, the Tribunal gave the following useful check list of factors to consider when deciding whether two supplies are to be combined as one supply.

  • The nature and extent of the transaction and the circumstances in which it takes place
  • The essential features of the transaction
  • What are its elements?
  • Would it be artificial to split these elements; alternatively, would it be artificial to combine them?
  • Are they so closely linked that they form a single economic transaction which it would be artificial to split?
  • Is there a principal service consisting of one or more predominant elements?
  • Is there an ancillary service consisting of one or more elements which does not constitute for consumers an aim in itself?
  • Is the ancillary service a means of better enjoying the principal service?
  • Are there various elements which fall to be treated as one over-arching supply?
  • Is one supply of no use without the other?
  • Has a single price been charged?

The Tribunal concluded that the supplies of the football pitch and of the league management services were not so closely linked that it would be artificial to split them.  This view was supported by the separate pricing, separate contracts and, after considering all the elements of the transactions in detail, the overall impression that the two supplies were not “participation in a sports competition”.

For further information on whether supplies should be combined or split for VAT purposes, particularly where the supplies are subject to different rates of VAT, please contact the TaxDesk on 0845 4900 509 and ask for Vaughn Chown or Kevin Hall.