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© 2015 Grant Thornton UK LLP. All rights reserved.
ITU Summary A relatively quiet week this week.
The Highlight being the Upper
Tribunal's judgment in the
Colaingrove Ltd case relating to
whether a supply of electricity to
a holiday chalet was a single
supply and if so, whether the
electricity element could be
separated and subject to the
reduced rate of VAT of 5%
The First-tier Tribunal has issued
a couple of interesting decisions
too. The first relating to the issue
of whether a business was
trading as an agent or as a
principal and the other relating to
the correct classification of
mobility scooters for customs
duty purposes.
16 March 2015
HMRC v Colaingrove Limited
The question in this case was whether a supply of electricity by the taxpayer to holiday
chalets and caravans should be regarded as a separate supply to which the VAT
reduced rate of 5% should apply or whether there was, simply, a single supply of
serviced holiday accommodation. The First-tier Tribunal (FTT) had found in favour
of the taxpayer and this was HMRC's appeal from that decision to the Upper Tribunal.
Supplies can consist of many elements, but case law tells us that, in such situations,
where one element predominates, and other elements are ancillary, the general rule for
VAT purposes is to look at the predominant element as constituting a single supply. In
these cases, the VAT liability of the single supply takes on the liability of the
predominant element. The taxpayer conceded at the Upper Tribunal that there was, in
fact, a single supply of serviced holiday accommodation, (although it had argued that
there was a mixed supply at the FTT). However, it then argued that, even though there
was a single supply, nevertheless, as UK VAT law specifically provides for supplies of
electricity, when supplied for domestic use to be subject to the reduced rate of 5%, that
element of the single supply should also be reduced rated.
HMRC on the other hand, contended that Colaingrove provided and charged for
electricity as part and parcel of its supply of fully serviced holiday accommodation and
that there is no provision in UK law for the application of the reduced rate to the
electricity element.
In short, the FTT concluded that UK VAT law must be construed as applicable only
to the single supply identified and not to elements within that supply. This decision
follows quickly on the heels of the Upper Tribunal's similar judgment in the case of
Wm Morrison Supermarkets PLC in relation to the supply of disposable barbeques. In
that case, the taxpayer argued that the supply of charcoal was an element of the single
supply of the barbeque and subsequently was entitled to be reduced rated.
The whole issue of the VAT treatment of single v multiple supplies remains a complex
area of VAT law. This case, along with the Wm Morrisons case seems to have put paid
to the argument that elements within a single supply can be taxed at different rates.
However, an appeal to the Court of Appeal may ensue.
Issu
e 1
0 | 2
01
5
Single v Multiple Supplies
Indirect Tax Update
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Agent or principal?
Ronald Asquith
The FTT has issued a decision in the above case, which related to the thorny old question of whether
someone is acting as an agent or as a principal. In this case, Mr Asquith sold tickets to events (such as
football matches and concerts). He claimed that his income was derived solely from "commission" he
earned acting as an agent. HMRC on the other hand argued that, on the evidence, Mr Asquith traded
as principal. Accordingly, the whole of the income he received from the selling of tickets was his
turnover and he was, therefore, liable to be registered for VAT.
The onus of proof in such cases as this rests with the taxpayer. Unfortunately, Mr Asquith was
unable to convince the FTT that he acted as an agent for his customers. Recent cases in this area
have stressed the importance of considering the contractual documents between the parties to
determine their legal relationships. Unfortunately, Mr Asquith could provide little by way of legal
documentation to support his contentions about the way in which he acted for his clients and, as a
result, the FTT had no real alternative but to find for HMRC.
Whether or not there is an agency is a question of both fact and law. If agency is being claimed, it is
vitally important to be able to demonstrate evidence to support that contention. The financial
consequences of this decision was that Mr Asquith had been liable to register and account for VAT
since 1999.
Comment
Agency is a difficult
area of the law and, in
VAT terms, can cause
difficulties.
It is normally clear
from the contract
between parties
whether there is an
agent / principal
relationship but, as this
case shows, it is not
always the case.
Businesses acting in an
agency capacity need to
be able to evidence that
fact.
Tariff classification
Comment
The correct
classification of goods
for customs duty
purposes is vitally
important. Whether an
item falls within one
tariff heading or
another can have a
dramatic impact on
profitability. The tariff
heading determines the
rate of duty payable on
the importation of
goods.
Invamed Group Ltd & others
The FTT has also issued a judgment this week in relation to the classification of goods for customs
duty purposes. The goods in question were mobility type scooters. In simple terms, the issue was
whether such scooters should be classified under the tariff as "carriages for disabled persons" under
heading 8713 or, as HMRC contended, as "motor vehicles principally designed for the carriage of
persons" under heading 8703.
Following the judgment of the CJEU in an earlier and similar case (Lecson Elektromobile GmbH),
where the court decided that the scooters should be classified under heading 8703, HMRC argued
that the scooters in this case were not designed for use by the disabled but only by 'less abled' people.
But for the earlier judgment of the CJEU in Lecson, the FTT stated that it would have decided that
the scooters should be classified under heading 8713. However, there is sufficient doubt as to the
correct interpretation of the Lecson judgment that it felt it was unable to come to a decision without
a further referral to the CJEU.
The FTT will, in due course, ask the CJEU for guidance. In particular, the FTT will ask whether a
scooter "designed" for the use of a disabled person but which is also capable of being used by a
person who is not disabled falls within the tariff classification 8713. It is likely to be 18 months or so
before the CJEU gives judgment.
Contact Stuart Brodie Scotland [email protected] (0)14 1223 0683
Karen Robb London & South East [email protected] (0)20 772 82556
Richard Gilroy London & South East [email protected] (0)20 7728 3170
