HMRC Stymied Over Caravan Tax Claim

VAT law is clear that when a supply is made as a single supply, the VAT rate which applies is that of the principal supply. However, sales frequently include items that carry different rates of VAT.



If it favours them (i.e. leads to VAT becoming payable), HM Revenue and Customs (HMRC) quite often seek a ruling that a supply is not a single supply but a ‘mixed’ supply: the practical difference being that in the latter case the VAT treatment of each component is separated.



So it was that a supplier of static caravans (zero-rated) found itself in dispute with HMRC over the VAT status of the verandas (standard rated if sold as a separate supply) attached to the caravans.



Fortunately for the taxpayer, the Upper Tribunal rejected HMRC’s contention that the supply of a caravan plus veranda was a mixed supply, concluding instead that it was a single supply of which the supply of the caravan was the principal component.



If your supplies contain components which have different VAT treatments if sold individually, it is important to understand the VAT implications.