VAT Supply case
A recent VAT case at the High Court explored the issue of single versus composite supplies. This was a complex case which included an appeal to the Tribunal decision by both parties.
The case concerned the VAT liability of fees paid by participants in a weight loss programme. The single weekly fee included the supply of meal replacement packs alongside counselling and support services. HMRC contended that this was a single supply of weight loss support (standard rated) whilst the taxpayer initially contended there was one single rated supply of zero-rated food and then two separate supplies (one standard rated and one zero-rated).
The High Court in determining what supply took place used a supply test that has not been used before. The High Court accepted that the food was the dominant element of the supply but ruled that neither element was ancillary to the other.The Court concluded that what the typical customer was buying was the combination of food packs and support services and that ‘the link between the two elements went beyond mere packaging‘.
The judge ultimately concluded that the character and liability of the single supply was different from its dominant element and hence VAT was due on the full fee (e.g. as a standard rated single supply of services). The appeal by HMRC was allowed.