The FTT decision in Serpentine Gallery (TC03992) seems more a Greek drama than a ground-breaking decision on VAT principles, writes Graham Elliott, consultant, Withers
In this case, the charity had not, until 2013, set up its committed giving scheme to show that donors’ payments were partly for benefits and partly gift. This is standard practice both for VAT and gift aid purposes. If this is omitted, VAT can arise on the full payment and gift aid can be jeopardised. We have known about ‘split payments’ for some while, but the message does not always get out.
But there is more to this decision than mere restatement of familiar principles, so I will focus on one of the contended points, where I think there is something new and treacherous.
One of the arguments, which the tribunal rejected, was that the supply was a mixture of exempt, zero rated, and standard rated supplies, rather than a composite standard rated supply. The supplies in question were tailored benefits, comprising exclusive hospitality, special access to the gallery, discounts and privileged information. These are commonplace in the subsidised arts sector.
The tribunal followed the general drift of case precedent towards seeing a single ‘bargain’ as entailing only one composite supply for VAT. It started by accepting that there was no predominant supply in these packages, and thus no elements which merely allowed the customer ‘better to enjoy’ a principal supply. That removes the Card Protection Plan (C-349/96) rationale for a composite supply. It looked at the so-called ‘table top’ approach, which asks whether the constituent elements coalesce to form something else or something which was more than the sum of the parts. Here, the tribunal seemed to accept that this was not exactly the situation, thus distinguishing the case from the Levob (C-41/04) precedent. So far, so satisfactory, as we seem on course to a multiple supply analysis. But that was not to be, because we are told that the benefits ‘were as a whole a package of related services … the opportunity, together with other interested persons, to partake of exclusive events at, and offers by the gallery, [which] amounted to a single supply’.
At the risk of appearing facetious, this seems akin to saying that, as the benefits were presented in one glossy wrapper with a nice piece of ribbon, they must be a single package for VAT purposes. But it is only the packaging which brings these benefits together. No doubt the donor saw something cohesive and satisfying in obtaining the package, but the same can be said of a food hamper, which is rightly treated as a multiple supply. The objective position is that the benefits are free-standing and do not coalesce into something different. So, on this I am not with the tribunal.
On another point, the tribunal also commented extensively about a HMRC concession that the latter did not accept was applicable to this case, and which neither party seemed to think was a relevant factor. It also went out of its way to criticise the outcome of a settlement between the parties under ADR dealing with the post 2013 treatment. Damage can only be done to the ADR process if judges later criticise it for lack of legal rigour.
The FTT decision in Serpentine Gallery (TC03992) seems more a Greek drama than a ground-breaking decision on VAT principles, writes Graham Elliott, consultant, Withers
In this case, the charity had not, until 2013, set up its committed giving scheme to show that donors’ payments were partly for benefits and partly gift. This is standard practice both for VAT and gift aid purposes. If this is omitted, VAT can arise on the full payment and gift aid can be jeopardised. We have known about ‘split payments’ for some while, but the message does not always get out.
But there is more to this decision than mere restatement of familiar principles, so I will focus on one of the contended points, where I think there is something new and treacherous.
One of the arguments, which the tribunal rejected, was that the supply was a mixture of exempt, zero rated, and standard rated supplies, rather than a composite standard rated supply. The supplies in question were tailored benefits, comprising exclusive hospitality, special access to the gallery, discounts and privileged information. These are commonplace in the subsidised arts sector.
The tribunal followed the general drift of case precedent towards seeing a single ‘bargain’ as entailing only one composite supply for VAT. It started by accepting that there was no predominant supply in these packages, and thus no elements which merely allowed the customer ‘better to enjoy’ a principal supply. That removes the Card Protection Plan (C-349/96) rationale for a composite supply. It looked at the so-called ‘table top’ approach, which asks whether the constituent elements coalesce to form something else or something which was more than the sum of the parts. Here, the tribunal seemed to accept that this was not exactly the situation, thus distinguishing the case from the Levob (C-41/04) precedent. So far, so satisfactory, as we seem on course to a multiple supply analysis. But that was not to be, because we are told that the benefits ‘were as a whole a package of related services … the opportunity, together with other interested persons, to partake of exclusive events at, and offers by the gallery, [which] amounted to a single supply’.
At the risk of appearing facetious, this seems akin to saying that, as the benefits were presented in one glossy wrapper with a nice piece of ribbon, they must be a single package for VAT purposes. But it is only the packaging which brings these benefits together. No doubt the donor saw something cohesive and satisfying in obtaining the package, but the same can be said of a food hamper, which is rightly treated as a multiple supply. The objective position is that the benefits are free-standing and do not coalesce into something different. So, on this I am not with the tribunal.
On another point, the tribunal also commented extensively about a HMRC concession that the latter did not accept was applicable to this case, and which neither party seemed to think was a relevant factor. It also went out of its way to criticise the outcome of a settlement between the parties under ADR dealing with the post 2013 treatment. Damage can only be done to the ADR process if judges later criticise it for lack of legal rigour.
