Single or Multiple Supplies – Impact of the Card Protection Plan Case

14 October 2008

Affiliated to the subject of recharges, covered by a recent article, is the issue of how to differentiate between single and multiple supplies for VAT purposes. In certain circumstances, there will be different parts or facets to a supply, which are viewed together as one overall supply but sometimes each individual part or facet would be viewed as a supply in its own right, and of course, not all of those parts will necessarily have the same VAT treatment. There follows an example of each:

One supply – the purchase of a plane ticket, which is a supply of zero-rated passenger transport. On most scheduled flights, that supply would include the provision of a meal which, on its own would be a supply of standard rated catering, but the passenger is deemed to be buying a single supply of passenger transport services, of which the catering forms an ancillary part.

Multiple supplies – somebody paying for a riverboat trip, which includes a substantial meal on board. The meal is just as important for the customer as the riverboat trip and therefore is not ancillary to the zero-rated passenger transport service. Standard rated VAT would be due on the meal element.

As there are so many scenarios in which it could be difficult to decide which applies, the guidelines set down by the ECJ in the Card Protection Plan case are used:

1. Since it is not possible to give guidance that would cover all cases of single/multiple supplies, when you are considering a transaction that consists of a number of components regard must be had to all the circumstances in which that transaction takes place.

2. Each supply of a service must normally be regarded as distinct and independent.

3. A supply that comprises a single service from an economic point of view should not be artificially split – the essential features of the transaction must be ascertained to decide if the supply to a typical customer comprises several distinct principal services or a single service.

4. There is a single supply in cases where one or elements are to be regarded as ancillary services. An ancillary service is defined as something that does not constitute for customers an aim in itself but is a means of better enjoying the principal service supplied.

5. The fact that a single price is charged is not decisive. If the circumstances indicate that customers intend to purchase two or more distinct services a single price will not prevent these being treated as separate supplies with different liabilities applying, if appropriate, to those services.

Principle 4 is most commonly used in decision-making but the others should not be forgotten. Whoever said VAT was a simple tax?