Single versus Multiple supplies

VAT consultant Tim Fife examines why differentiating between single and multiple supplies is important.

I have just spent two days in a Virtual Tribunal discussing the various legal arguments over whether the hire of an ice skate for a child’s use can be carved out of a skating with skate package. Why is this important? The VAT liability of skate hire is zero rated but access to a skating rink is standard rated. The client would be liable to VAT on the whole supply rather than 50% so a loss of £1 per client on a £12 entry fee.

To explain this further I will use the example of a mixed pack of biscuits. For simplicity there are no Jaffa cakes! There are three scenarios.

  1. A normal mixture of biscuits that have some packaging, which would be standard rated, the whole of the supply is sold zero rated.
  2. A lovely mixed box of biscuits including some chocolate ones in a festive tin, the supply remains zero rated but only if the weight of standard-rated chocolate biscuits does not exceed 15% of the net weight of the whole, may it be treated as a single zero-rated supply.
  3. How about purchasing a decorative ceramic biscuit barrel containing mixture of biscuits? The biscuits become the lesser part of the supply so the whole of the supply becomes standard rated.

The issue regarding Single versus Multiple supplies is what constitutes each. In example three you could go to a shop and buy a biscuit barrel and some biscuits at the same time. This is the basic issue: can you buy the individual items as one single item or can they be bought separately. As we don’t have legislation to rely upon we have to rely on the results of tribunals and these have not created any certainty as both sides argue the same case when it suits them. Although we do not have any specific VAT tribunals for biscuits we do have a raft of cases which have sought to clarify the issue.

We have victories for HMRC and the taxpayer. In the case of “purple parking” the taxpayer tried to strip out a zero-rated transport from the car to the airport terminal. In the “British airways” case HMRC unsuccessfully argued that a meal enjoyed on a flight would be separately standard rated. I could continue over a raft of cases. The key lesson is to consider what effect a change of liability could have on your supplies. One area of concerns relates to “memberships” and the level of different liability of goods and services you are entitled to receive. To illustrate this Sky used to send out a magazine which was part of your subscription. They unsuccessfully argued that this was a separate supply of a zero-rated magazine.

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