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HMRC internal manual

VAT Burial and Cremation

Background and law: Packages of mixed VAT liabilities

Where an undertaker provides a single supply of a funeral package comprising both exempt and standard-rated elements, the VAT liability of the package must be apportioned accordingly (see VATSC - Supply and consideration: Supply and consideration). This is because the EU legislation which enables the UK to continue to exempt burial and cremation services does not permit the UK exempt anything that was not within the scope of the relief on 1 January 1978 (see VBURC2200). This is sometimes known as a standstill provision.

The EU provision which enables the UK to continue to exempt burial and cremation services is similar to the provision that permits the UK to maintain certain zero rates.

European Court of Justice decision

Under Article 28 (2) of the Sixth Directive (now Article 110 of the Principal VAT Directive (Dir 2006/112)), the UK zero rates the supply of certain caravans. However, the zero rating does not extend to removable contents, which are seen as part of a single composite supply of the caravan. In Talacre Beach Caravan Sales Ltd v Commissioners of Customs & Excise (Case C-251/05), the European Court of Justice found that the UK was correct in restricting the zero rating for caravans to the supply of the caravan itself, while applying VAT at the standard rate to removable contents provided with the caravan, albeit that there was a single supply.

The Court stated: “The fact that specific goods are counted as a single supply, including both a principal item which is by virtue of a Member State’s legislation subject to an exemption with refund of the tax paid [zero rate] within the meaning of Article 28(2)(a) of the Sixth Council Directive …, and items which that legislation excludes from the scope of that exemption, does not prevent the Member State concerned from levying VAT at the standard rate on the supply of those excluded items.”