In Gap Group Limited v HMRC [2023] TC08991, the First Tier Tribunal (FTT) found that the supply of diesel in respect of hired plant was, for VAT purposes, separate from the supply of plant hire. Reduced rating applied to the fuel.

  • Gap Group Limited (Gap), a plant hire company, provided a number of items of equipment on hire such as telehandlers, excavators, dumpers and diggers to sectors including construction and civil engineering.
  • When Gap delivered items of plant on hire to customers, they were provided with a full tank of red diesel.
  • Where the hired plant was returned to Gap with less than a full tank of fuel, Gap would charge their customer for the red diesel required to return the tank to full.
    • Gap did not encourage customers to buy fuel from them in this way and actively charged a margin so that the fuel supplied by Gap was significantly more expensive than from other fuel suppliers.
  • Gap treated any such supplies of red diesel to their customers as being separate from the supply of equipment hire.
    • In Gap’s view, this existence of Multiple supplies meant that the supply of red diesel was reduced rated, unlike the hire charges which were standard rated.
  • Following a VAT inspection, HMRC contended that the supply of red diesel fuel formed part of the main supply of plant hire.
  • In March 2021, HMRC raised an assessment for underdeclared VAT. Following a Statutory review, the assessment was upheld save for a calculation error.
  • Gap Appealed to the First Tier Tribunal (FTT).

The FTT found that there were multiple supplies for VAT purposes:

  • At the point that the hired plant was delivered to the customer, Gap could not have known whether it would make a supply of fuel, or not.
  • When customers hired the plant, they were aware they could opt for Gap to refuel it when it was returned at the end of the hire period.
    • Customers knew this was an optional extra and not included in the hire charge: the costs of hire and fuel were separately identified.
  • The fuel was acquired by the customer at the point they chose not to refill the tank.
    • Customers had unfettered and genuine contractual freedom to make such a choice.
  • The supply of the fuel could not be for the better enjoyment of the hired plant as the choice not to refuel it was made at the end of the hire period when the hire had concluded. It was simply a matter of convenience.

The appeal was allowed.

Useful guides on this topic

Mixed supplies: Single or Multiple supply?
Is a mixed supply a single or multiple supply for VAT purposes? What tests and case law apply?

Goods or services for VAT
What are goods and what are services for VAT? The answer may have an impact on the time of supply, the place of supply and in some cases the rate of the supply. The answer is not always as straightforward as it may seem.

A beginner's guide to VAT
VAT: Where do I start? What is VAT? Who has to register for VAT? What rate should I charge? How do I calculate VAT? When are my VAT filing obligations?

Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?

External link

Gap Group Limited v HMRC [2023] TC08991

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