The Upper Tribunal (UT) has found In Colaingrove Limited v HMRC [2015] UKUT that supplies of verandas when sold with static caravans are zero-rated for VAT.
Colaingrove Ltd sells static caravans as part of its business operating holiday parks in the UK. The sale of caravans is zero rated under Group 9 of Schedule 8 VATA 1994. However, alongside the caravans, Colaingrove often sells verandas which, if sold separately, would fall to be taxed as standard rated supplies.
The issue was whether the principles of the ECJ case Card Protection Plan (CPP) should apply to treat the sale of a caravan together with a veranda (which is bolted to the caravan) as a single supply of the principal element of a caravan and an ancillary element of the veranda and furthermore whether this single supply should be subject to a single rate of VAT.
The First Tier Tribunal (FTT) refrained from using the generally accepted principles set out in CPP and instead relied on UK cases decided before CPP in order to reach the conclusion that the supply of verandas should be standard rated. In particular, the FTT commented that national legislation provided for separate VAT rates in certain circumstances regardless of whether there was a single supply.
However, the UT has now overturned this decision and has criticised the FTT for relying too heavily on cases such as Talacre Beach Caravans Ltd v C & E Commrs [2007] BVC 366. In Talacre, what was being supplied was a caravan with removable contents, and the relevant legislation in Talacre expressly stated that removable contents would not be zero rated. Here, there was no equivalent legislation excluding the application of zero-rating to verandas. The UT concluded that, as there was only a single supply, that supply should be subject to a single rate of VAT unless there was specific provision which provided that more than one rate should be charged.
The UT therefore allowed Colaingrove's appeal and held that the supply of a veranda with a static caravan comprised a single zero rated supply.
This decision is significant as the UT has confirmed the importance and broad application of the principles established in CPP when deciding between a single supply and multiple supplies, and that the test has not been diminished by cases such as Talacre. The Talacre case merely limits the effect of a single supply analysis so as to enable any national legislation, where relevant, to apply zero rating only to a specific element of a single supply.
If you have any questions relating to this or any other tax issue, please contact Nigel Popplewell.