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HMRC internal manual

VAT Fuel and Power

HM Revenue & Customs
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Scope of the reduced rate: domestic Use: wholesale supplies

Wholesale supplies are standard-rated unless they are deemed to be for domestic use (see VFUP2310). The standard rate applies even if it is known that the goods will eventually be supplied for qualifying use.

Supplies to a residential landlord are not treated as being wholesale supplies. Here the landlord is taken as the person making a supply to the person in occupancy.

These points are highlighted by the following VAT & Duties Tribunal case Oval (717) Ltd, LON/2001/1070 (VTD 17875), in which the appellant was a wholly-owned subsidiary of the University of Bristol, the latter being the landlord. It bought in gas and resupplied it to the university, who used it in buildings used as residential accommodation for students.

Customs and Excise accepted that the supply by the appellant to the university was for qualifying use and thus reduced-rated. The appellant argued that the gas was also supplied for qualifying use when it bought it in, as it was for use in a building used as residential accommodation for students.

The appellant said that it could accept the view of Customs and Excise if the supplies concerned only VAT. But their liability to the standard rate of VAT meant that the supplies were also subject to Climate Change Levy (CCL, see VFUP5000), which, unlike VAT, was non-deductible. However, the tribunal stated that its decision would only relate to VAT, as it did not refer to the CCL legislation.

The tribunal stated that one had to look at the particular supply in question. In dismissing the appeal the Tribunal said: if [the appellant] were right … all the suppliers in a chain of supply … would have to wait until the final supply to see to what use the goods were ultimately put as that would determine the rate of tax applicable to earlier supplies.

For more information about the CCL treatment of wholesale supplies, see Notice CCL1: A general guide to climate change levy.