Background and law: The law
Undertakers’ services are not among the mandatory exemptions listed in Article 135 of the Principal VAT Directive. However, Article 371 allows Member States to continue to exempt certain exemptions that were in force on 1 January 1978, including:
Annex X, part B(4):
The supply of services by undertakers and cremation services and the supply of goods related thereto.
The terms of Article 371 do not allow the UK to extend the scope of the exemption beyond its application on 1 January 1978.
The relevant exemptions are contained in Group 8 of Schedule 9 to the VAT Act 1994, which covers:
The disposal of the remains of the dead.
The making of arrangements for or in connection with the disposal of the remains of the dead.