The Court of Appeal has dismissed the taxpayer’s appeal on the treatment of fuel and power in holiday accommodation.
This case concerns a popular Sun newspaper promotion under which readers collect tokens in return for cheap chalet or caravan holidays. The accommodation charge (typically £60) is collected by the newspaper and paid, less commission, to Colaingrove when the holiday takes place. The dispute concerns the fixed daily charges customers are required to pay to Colaingrove in advance for gas and electricity. This is a minor part of the total payment, The supply of domestic fuel power is subject to the reduced rate of VAT under VATA 1994, Schedule 7A. The Court of Appeal (CoA) determined that where an otherwise reduced rated supply of power is part of a wider single standard rated supply the reduced rate would not apply. There is no carve out for the fuel element.
The original First-tier Tribunal (FTT) found for the taxpayer concluding that, whilst there was not a separate supply of fuel, the reduced rate should nonetheless apply to the supply of fuel and power. The Upper Tribunal (UT) reversed this decision, following the UT’s decision in WM Morrison and the FTT in AN Checker in concluding that the reduced rate does not apply where, under CPP principles, the reduced rate element is part of a wider single standard rated supply. The taxpayer appealed to the CoA.
The taxpayer argued that the word ‘supply’ in Schedule 7A should not be interpreted in terms of EU case law and that a supply can be something that forms part of a larger supply. The Court disagreed and added that s29A applies the reduced rate to supplies ‘of a description’ in Schedule 7A.
Intention of Parliament
The Court noted a number of provisions in Schedule 7A and 8 which allow apportionment. If there had been an intention for a similar apportionment in this type of structure a similar provision would have been inserted. Following WM Morrison there would need to be specific wording for the reduced rate to apply. Vos J suggested in WM Morrison the reduced rate legislation would need to expressly identify “charcoal as part of disposable barbecues”.
The taxpayer ran the two caravans argument again – one owned caravan receiving a supply of power subject to the reduced rate and, if HMRC are right, a holiday maker receiving a supply of power at the standard rate. The Court dismissed this on the basis that one is a supply of power and one is serviced holiday accommodation. Therefore different rates can apply.
Lady Justice Arden therefore dismissed the appeal with the remaining two judges in agreement. The taxpayer was ordered to pay costs.
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