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Andrew Needham of VAT Solutions (UK) Ltd provides a further update on recent VAT decisions.

VAT Tribunal agrees that taxpayer supplied separate zero-rated printed matter

A classic ‘single supply v multiple supply’ argument, concerning the weekly meetings for slimmers (including weigh-ins) and the literature provided on initial registration and at those meetings. HMRC had previously allowed an apportionment, but issued a revised ruling from 1 January 2005 that there was a single standard-rated supply of a weight loss programme.

The Tribunal Chairman, in his analysis of the case-law, very much took the view that in cases involving a mix of goods and services, the ‘Levob’ case (C-41/04) was the leading

precedent, having built on the earlier principles established in the Card Protection Plan case (C-349/96). There was a particular reference to the following comment in Levob: 'where two or more elements or acts supplied by the taxable person to the customer, being a typical customer, are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split'.

The Chairman decided there was no single indivisible supply at the first or subsequent meetings, and that there was nothing artificial about splitting the printed matter and the attendance at the meetings. A contributory factor to this conclusion appears to be the fact that there are a certain number of slimmers, described as 'at home members', who receive the printed matter without attending meetings.

The appeal was allowed with a comment that the zero-rated percentage applying to initial registration, where a 170 page handbook is supplied, would be higher than with subsequent meetings, where only leaflets are supplied.

Weight Watchers (UK) Ltd (VTD 20,038)

Tribunal agrees that fitting service was a separate supply

A dispute over the changed arrangements in the supply of fitted kitchens, through which, the Appellant claimed that the related supply of fitting services was not part of his taxable supply to the customer, but was rather a separate supply by the non-registered fitter to the customer.  The surprise here is that, unlike most of these cases, the appeal succeeded!

HMRC's main arguments for a single supply were as follows:

• the Appellant's representative determined the estimated charge for fitting on the initial visit to the customer, 
• the Appellant determined the identity of the fitter to be used if (as in most cases) the customer asked the Appellant to recommend a fitter
• the wording used in the Appellant's printed promotional material and website implied a single supply of goods and fitting services.

The Chairman rejected the latter point on the grounds that it should not be regarded as determinative and that, in any case, evidence suggested that a very low level of sales arose from these media. He saw no real significance in the estimates point, as the customer needed to have some general idea of total cost, and the fitting estimates were based on standard industry costings. He also saw no real significance in the fact that the Appellant pointed customers towards one fitter rather than several. The Chairman appeared more influenced by the fact that the Appellant's premises contained notices to the effect that it did not supply fitting services, but was able to recommend the services of a self-employed independent fitter, and the fact that both a fitter and a customer gave evidence that customers could negotiate the fitting price with the fitter independently of the Appellant.

Fineline Bedrooms & Kitchens Ltd (VTD 20,049) 

Tribunal says MOT fees were eligible for VAT disbursement

The Appellant was a garage not authorised to provide MOT tests, so took his customers' cars to two garages that were. He charged £44 on his invoices and paid £35 to the two  garages, (the figures were not disclosed to the customers). HMRC argued the Appellant provided a single supply of arranging an MOT and moving the vehicle to and from the testing garage. HMRC stated that, in accordance with their guidance in Notice 700, the £35 could only be treated as a disbursement if the MOT test element and the delivery and collection element were separately identified on the invoice to the customer. 

The Chairman said the HMRC assessment was not in ‘best judgment’ and that the true value of the Appellant’s supply was the retained £9. He rejected HMRC’s argument because it failed to recognise the reality that an MOT test was not a supply or service that the Appellant could lawfully provide. Also, Notice 700 did not have force of law, and failed to recognise the legal monopoly position of authorised MOT testing stations.

G Duncan t/a ‘G Duncan Motor Services’ (VTD 20,100)