Single and Multiple Supplies

Where a variety of goods/services are supplied to customers by a single supplier, the VAT treatment of single and multiple supplies should be considered. This has formed the basis of a number of cases heard in recent weeks and therefore businesses providing supplies that fall under the scope of these rules should re-examine their VAT treatment of these to ensure they are meeting their VAT obligations.

Where there is a ‘principal’ or ‘dominant’ supply, with additional ancillary supplies provided to allow the customer to better enjoy the principal supply, this will be a single supply for VAT purposes and will be subject to a single VAT rate. 

Conversely, a multiple, or combined supply, will consist of various independent goods or services for a single inclusive price. It may be the case that, where there is no dominant supply, different elements will attract different VAT rates and must be identified separately.

There is no definition of a single/multiple supply within HMRC legislation and as such, precedents set in relevant past cases heard by the courts should be considered. As stated within VAT Manual VATSC11113;

The following indicators were present in cases where the courts ruled there were multiple supplies:

• There is more than one supplier.
• The view of a typical consumer is that they are buying two or more distinct and independent supplies: i.e., are the individual elements part of a single transaction from the customer’s perspective and amount to a single aim.
• The terms of the contract and ‘economic reality’ indicate more than one supply: VAT Manual VATSC11124 further expands on this point; “Where there are different elements which are not reliant on one another to be delivered - and are unaffected if other elements are not provided - then this is an indicator of multiple supplies because it cannot be artificial if those elements are split out and have their own identity.” The fundamental principal to consider in this instance is whether customers are purchasing one predominant supply with the other items ancillary – if one element is predominant the supply would follow the VAT liability of that element.
• The intention of the legislation: This is to ensure there is not an illegal extension to zero-rating/reduced rating or exemption from VAT to artificially apply a lesser rate of VAT to a product than would otherwise be appropriate.
  

These rules have been highlighted in various tribunal cases in recent months, namely;

• A case heard by the First-tier Tribunal in relation to dip pots provided alongside KFC meals formed part of a single standard-rated supply, following the same VAT liability as the meal itself, despite being liable to the zero-rate as a food item when sold separately. In this case, on considering the criteria it was deemed that overall sale of the meal deal did not constitute a multiple supply where the individual applicable VAT rate of each element, including the dip pot, would be relevant.
• In the case of Spectrum Community Health CIC, an appeal was made to the Upper Tribunal regarding whether prescription drugs could constitute a taxable supply, separate to that of exempt healthcare when provided by a healthcare provided contracted by NHS England. However, the Upper Tribunal upheld the First-tier Tribunal’s original decision that this amount to a single supply of exempt healthcare, denying the Appellant’s ability to register for VAT and recover a proportion of input tax relating to taxable supplies.
• A further Upper Tribunal ruled, in the case of SilverDoor Ltd a business acting as an agent in arranging accommodation, regarding whether card handling fees constituted a separate service (that may be exempt under the financial exemption) or ancillary to the principal service provided, i.e., that of short-term accommodation. As with the other cases detailed above, this was deemed to be part of a single supply as it was ancillary to the principal reservation service.
  

As demonstrated by the above cases, this guidance applies to a wide variety of industries and types of supply.

Accounting for VAT on supplies consisting of various elements can often be a difficult area to navigate and due to the complexity of the surrounding legislation, and potential for application of assessment and penalties where this is applied incorrectly, it is important to seek professional advice regarding whether these constitute single supplies with single VAT rate, and, if not, how to apply these multiple rates both retrospectively and going forward. 

To discuss in further detail, please contact our team of expert consultants on our free VAT helpline at 0161 477 6600 / enquiries@thevatpeople.com.