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VAT Voice by Andrew Needham

Andrew Needham, Director of VAT Solutions (UK) Ltd, reports two recent VAT cases involving caravans and car registration duty.

Excluded From Main Zero-Rated Sale

Item 1 of Group 9 in Schedule 8 to the Value Added Tax Act 1994 zero-rates caravans but the Note to the Group provides that removable contents are not zero-rated. The UK taxpayer concerned argued that under the Card Protection Plan principle, there was single, zero-rated supply of a caravan, to which the removable contents were merely incidental, thus making them zero-rated also. HMRC won at Tribunal and the High Court, but the CoA referred the issue to the ECJ.

The AG’s Opinion has been released, which sees Advocate-General Kokott siding with HMRC. In her Opinion, the Card Protection Plan principle does not extend to cover the Article 28 regime, whereby the UK is permitted by derogation to zero-rate caravans. The UK is entitled to limit that zero-rating without interference.

The AG’s conclusion on the case is summarised as follows:

“The rules on determining the scope of a transaction do not preclude an exemption of a Member State, under Article 28(2)(a) of [the Sixth VAT Directive 77/388/EEC], which zero-rates the supply of specified goods and excludes other items from the scope of the zero-rating, even if the excluded items and the included items are delivered together.”

Whilst the ECJ is not bound to follow the AG’s Opinion when eventually deciding the case, it does tend to do so in the majority of cases.

Talacre Beach Caravan Sales Ltd v (formerly) Commissioners of Customs and Excise, European Court of Justice, 3 May 2006 (C-251/05)

VAT And Car Registration Duty

The European Court delivered the Opinion of AG Kokott on 16 March 2006 in this Danish referral which asks, with reference to Articles 11(A)(2)(a) and (A)(3)(c), whether the value of a motor vehicle registration duty must be included in the taxable amount where, in accordance with the agreement with the purchaser of the motor vehicle, the motor vehicle is supplied by the dealer in the registered state and for an overall price which includes both the price paid to the dealer and also the duty.

The AG recommends that the Court finds that, where the dealer pays the registration duty in the name of the purchaser before delivery of the motor vehicle, holds the amounts in a suspense account in its accounting system and invoices the amount to the purchaser with the price of the motor vehicle, the value of the registration duty is not to be included in the taxable amount under Article 11(A)(2)(a) but meets the conditions for exclusion from the taxable amount under Article 11(A)(3)(c).

De Danske Bilimportorer v Skatteministeriet, European Court of Justice, 16 March 2006 (C-98/05)

May 2006

Andrew Needham
Director, VAT Solutions (UK) Ltd
Email: andrewneedham@vatsolutions-uk.com


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VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via their website: