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HMRC internal manual

VAT Land and Property

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HM Revenue & Customs
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Application of single or multiple supply criteria in relation to property

On the basis of existing case law there is likely to be a single supply where the following factors are present:

  1. there is one supplier
  2. the typical customer believes there to be only one supply
  3. the economic reality indicates that there is only one supply.

However, there is no single answer as to whether a transaction comprises a single supply or several different supplies - the answer will depend on the facts of each case. Written contract terms may not reflect the economic reality and are rarely determinative. Further information can be found in VATSC - VAT Supply and consideration.

In determining whether there is a single or multiple supply which involves property, a key consideration is whether non-payment of any sums under a lease will ultimately lead to a forfeiture of the lease. This is a strong indication that all sums payable under the lease are consideration for a single supply made under the lease or any linked/associated documents. This approach was applied by the CJEU in Field Fisher Waterhouse decision (C-392/11). The Upper Tier Tribunal decision in The Honourable Society of Middle Temple [2013] UKUT 0250 (TCC) followed the CJEU decision and went on to provide a very helpful series of pointers at paragraph 60 of its judgement.

“The key principles for determining whether a particular transaction should be regarded as a single composite supply or as several independent supplies may be summarised as follows:

Every supply must normally be regarded as distinct and independent, although a supply which comprises a single transaction from an economic point of view should not be artificially split.

The essential features or characteristic elements of the transaction must be examined in order to determine whether, from the point of view of a typical consumer, the supplies constitute several distinct principal supplies or a single economic supply.

There is no absolute rule and all the circumstances must be considered in every transaction.

Formally distinct services, which could be supplied separately, must be considered to be a single transaction if they are not independent.

There is a single supply where two or more elements are so closely linked that they form a single, indivisible economic supply which it would be artificial to split.

In order for different elements to form a single economic supply which it would be artificial to split, they must, from the point of view of a typical consumer, be equally inseparable and indispensable.

The fact that, in other circumstances, the different elements can be or are supplied separately by a third party is irrelevant.

There is also a single supply where one or more elements are to be regarded as constituting the principal services, while one or more elements are to be regarded as ancillary services which share the tax treatment of the principal element.

A service must be regarded as ancillary if it does not constitute for the customer an aim in itself, but is a means of better enjoying the principal service supplied.

The ability of the customer to choose whether or not to be supplied with an element is an important factor in determining whether there is a single supply or several independent supplies, although it is not decisive, and there must be a genuine freedom to choose which reflects the economic reality of the arrangements between the parties.

Separate invoicing and pricing, if it reflects the interests of the parties, support the view that the elements are independent supplies, without being decisive.

A single supply consisting of several elements is not automatically similar to the supply of those elements separately and so different tax treatment does not necessarily offend the principle of fiscal neutrality.”

This approach was followed in a more recent case of Sunnyside Property Limited (First Tier Tribunal) 2013.