VAT – Supply – Business involving provision of facilities for children’s parties in large barn – First Tier Tribunal characterising transaction as involving two principal supplies of use of barn and provision of refreshments respectively – Land exemption from VAT granted to respondent taxpayer in respect of former supply – Appellants contending transaction properly characterised as single supply of facilities for children’s party – Appeal allowed The respondent taxpayer ran a business that involved the provision of a large barn in which to hold children’s parties. The respondent’s website advertised various party packages at a fixed price per child. Each package included the use of the large main hall of the barn and of play equipment within it, buffet refreshments in a cafe room and the provision of at least one member of staff as the “party host”. The respondent claimed repayments of VAT in respect of that business. She claimed that the relevant supply for VAT purposes was a licence to occupy the barn, so as to fall within the land exemption in Item 1 of Group 1 in Part II of Schedule 9 to the Value Added Tax Act 1994. She argued that the licence to occupy was the principal supply, to which the other elements, including the use of the play equipment and the provision of refreshments, were merely ancillary. The appellant commissioners took the view that the respondent was not entitled to VAT repayments since the relevant transaction was properly characterised as a single supply of a children’s party. The First Tier Tribunal rejected both parties’ contentions and found that there were two supplies, namely a supply of the use of the barn, which fell within the land exemption, and a supply of refreshments, which did not. It found that all other elements were ancillary to one or other of those principal supplies. In reaching its conclusion, the tribunal found that the provision of the two principal elements were not so closely linked that the purchase of one element without the other would have been of no use for the customer’s economic purposes. The commissioners appealed. Decision: The appeal was allowed. A transaction that formed a single supply from an economic point of view should not artificially be split into separate supplies. For that purpose, regard should be had to all the circumstances in which the transaction took place. The test was whether the various elements supplied to the customer were so closely linked that they formed, objectively, a single indivisible economic supply, which it would be artificial to split: Card Protection Plan Ltd v Commissioners for HM Customs and Excise Case C-349/96 [1999] ECR I-973; [1999] STC 270 and Levob Verzekeringen BV v Staatssecretaris van Financien Case C-41/04 [2005] ECR I-9433; [2006] STC 766 applied. The test was not whether the different elements in the services provided by the taxpayer had value and utility in their own right: Commissioners for HM Revenue and Customs v Baxendale [2009] EWCA Civ 831; [2009] STC 2578 applied. It followed that the First Tier Tribunal had erred in its approach by asking whether one of the two principal elements would have been of use to customers without the other. That was not relevant to determining whether, objectively viewed from the perspective of a typical customer, there was a single supply as a matter of economic reality. Whether the various elements were so closely linked as to form a single, indivisible supply from the customer’s perspective had to be determined by looking at all the significant elements of the transaction. Taking all those elements into account, what the respondent supplied was, from the perspective of the customer, a group of facilities for a children’s party, provided as a single supply. The customers received a combination of facilities that enabled them to hold a children’s party. The fact that the various elements were available only as a single package at an all-inclusive price, while not determinative, reinforced that conclusion. Peter Mantle (instructed by the legal department of HMRC) appeared for the appellants; Roly Pipe, tax advisor, of Roly Pipe & Partners, of Ipswich, appeared for the respondent. Sally Dobson, barrister
VAT – Supply – Business involving provision of facilities for children’s parties in large barn – First Tier Tribunal characterising transaction as involving two principal supplies of use of barn and provision of refreshments respectively – Land exemption from VAT granted to respondent taxpayer in respect of former supply – Appellants contending transaction properly characterised as single supply of facilities for children’s party – Appeal allowed
The respondent taxpayer ran a business that involved the provision of a large barn in which to hold children’s parties. The respondent’s website advertised various party packages at a fixed price per child. Each package included the use of the large main hall of the barn and of play equipment within it, buffet refreshments in a cafe room and the provision of at least one member of staff as the “party host”.
The respondent claimed repayments of VAT in respect of that business. She claimed that the relevant supply for VAT purposes was a licence to occupy the barn, so as to fall within the land exemption in Item 1 of Group 1 in Part II of Schedule 9 to the Value Added Tax Act 1994. She argued that the licence to occupy was the principal supply, to which the other elements, including the use of the play equipment and the provision of refreshments, were merely ancillary. The appellant commissioners took the view that the respondent was not entitled to VAT repayments since the relevant transaction was properly characterised as a single supply of a children’s party.
The First Tier Tribunal rejected both parties’ contentions and found that there were two supplies, namely a supply of the use of the barn, which fell within the land exemption, and a supply of refreshments, which did not. It found that all other elements were ancillary to one or other of those principal supplies. In reaching its conclusion, the tribunal found that the provision of the two principal elements were not so closely linked that the purchase of one element without the other would have been of no use for the customer’s economic purposes. The commissioners appealed.
Decision: The appeal was allowed.
A transaction that formed a single supply from an economic point of view should not artificially be split into separate supplies. For that purpose, regard should be had to all the circumstances in which the transaction took place. The test was whether the various elements supplied to the customer were so closely linked that they formed, objectively, a single indivisible economic supply, which it would be artificial to split: Card Protection Plan Ltd v Commissioners for HM Customs and Excise Case C-349/96 [1999] ECR I-973; [1999] STC 270 and Levob Verzekeringen BV v Staatssecretaris van Financien Case C-41/04 [2005] ECR I-9433; [2006] STC 766 applied. The test was not whether the different elements in the services provided by the taxpayer had value and utility in their own right: Commissioners for HM Revenue and Customs v Baxendale [2009] EWCA Civ 831; [2009] STC 2578 applied.
It followed that the First Tier Tribunal had erred in its approach by asking whether one of the two principal elements would have been of use to customers without the other. That was not relevant to determining whether, objectively viewed from the perspective of a typical customer, there was a single supply as a matter of economic reality. Whether the various elements were so closely linked as to form a single, indivisible supply from the customer’s perspective had to be determined by looking at all the significant elements of the transaction. Taking all those elements into account, what the respondent supplied was, from the perspective of the customer, a group of facilities for a children’s party, provided as a single supply. The customers received a combination of facilities that enabled them to hold a children’s party. The fact that the various elements were available only as a single package at an all-inclusive price, while not determinative, reinforced that conclusion.
Peter Mantle (instructed by the legal department of HMRC) appeared for the appellants; Roly Pipe, tax advisor, of Roly Pipe & Partners, of Ipswich, appeared for the respondent.
Sally Dobson, barrister
