In HMRC v Colaingrove [2015] UKUT 80 (10 March 2015), the UT found that the reduced rate could not apply to an element of a complex supply to which the standard rate applied.
Colaingrove provided serviced chalets and static caravans at holiday parks. The issue was whether the provision of electricity by Colaingrove to holiday makers should be taxed at a reduced rate of VAT (under VATA 1994 Sch 7A Group 1), notwithstanding that the charge for electricity was an element of a single complex supply of serviced accommodation taxed at the standard rate.
Colaingrove contended that UK domestic legislation, on its true construction, provided for a reduced rate to apply to the supply of electricity, where that supply formed a concrete and separate part of a wider supply. It therefore fell to the UT to decide whether the exemptions, as enacted in the UK, fell within the ambit of the derogation permitted by EU law.
The UT wondered why Parliament would only give a tax break to those holiday makers that received their electricity by means of a single supply. It considered, however, that Parliament may have wanted to draw a distinction between the provision of electricity in a verifiable amount and the provision of a fixed charge irrespective of use. Agreeing with AN Checker [2013] UKFTT 506, the UT concluded that the ‘stumbling block’ was the combined effect of the Card Protection Plan(CPP) (C-349/96) line and the provision in VATA 1994 s 29A that a reduced rate of VAT may only be charged on a ‘supply that is of a description for the time being specified in Schedule 7A’. Neither French Undertakers (C-94/09) nor Talacre (C-251/05) ‘trumped’ the CPP analysis. The supply was not a supply specified in Sch 7A; and s 29A applied only to the single complex supply and not to elements of that supply.
Why it matters: Since French Undertakers and Talacre, many have wrestled with the notion that elements of a complex standard rated supply may be taxable at a reduced rate. This case suggests that those decisions were of limited application, so that most complex supplies should be charged at a single rate. In finding as it did, the UT recognised that its decision would have undesirable results when seen from the point of view of the recipients of the supply.
In HMRC v Colaingrove [2015] UKUT 80 (10 March 2015), the UT found that the reduced rate could not apply to an element of a complex supply to which the standard rate applied.
Colaingrove provided serviced chalets and static caravans at holiday parks. The issue was whether the provision of electricity by Colaingrove to holiday makers should be taxed at a reduced rate of VAT (under VATA 1994 Sch 7A Group 1), notwithstanding that the charge for electricity was an element of a single complex supply of serviced accommodation taxed at the standard rate.
Colaingrove contended that UK domestic legislation, on its true construction, provided for a reduced rate to apply to the supply of electricity, where that supply formed a concrete and separate part of a wider supply. It therefore fell to the UT to decide whether the exemptions, as enacted in the UK, fell within the ambit of the derogation permitted by EU law.
The UT wondered why Parliament would only give a tax break to those holiday makers that received their electricity by means of a single supply. It considered, however, that Parliament may have wanted to draw a distinction between the provision of electricity in a verifiable amount and the provision of a fixed charge irrespective of use. Agreeing with AN Checker [2013] UKFTT 506, the UT concluded that the ‘stumbling block’ was the combined effect of the Card Protection Plan(CPP) (C-349/96) line and the provision in VATA 1994 s 29A that a reduced rate of VAT may only be charged on a ‘supply that is of a description for the time being specified in Schedule 7A’. Neither French Undertakers (C-94/09) nor Talacre (C-251/05) ‘trumped’ the CPP analysis. The supply was not a supply specified in Sch 7A; and s 29A applied only to the single complex supply and not to elements of that supply.
Why it matters: Since French Undertakers and Talacre, many have wrestled with the notion that elements of a complex standard rated supply may be taxable at a reduced rate. This case suggests that those decisions were of limited application, so that most complex supplies should be charged at a single rate. In finding as it did, the UT recognised that its decision would have undesirable results when seen from the point of view of the recipients of the supply.
