In Europcar Group UK Ltd v HMRC [2020] TC7733, First Tier Tribunal (FTT) found that the supply of a car seat was separate to the supply of a car and should be charged at a reduced rate of VAT.
- Europcar is a car hire business where a car hirer could, as an optional extra, hire a child car seat at the same time as renting the car.
- There was no legal obligation on Europcar to provide car seats for car-hire customers with young children.
- Europcar claimed that it was making two separate supplies; of the car (standard rated) and the car seat (reduced rate of 5%) and it submitted voluntary disclosure claims seeking repayment of overpaid output tax of £631,000 during the period 1 October 2008 to 31 December 2015.
- HMRC refused the refund on the basis that the letting of a car with a child car seat is a single composite supply standard rate.
HMRC argued that ‘from the customer’s point of view’, the aim of a typical customer is not to hire a children’s car seat, but to hire a car in which all intended passengers can be transported safely and lawfully, hence the supply is a single supply.
The FTT disagreed, it found that:
- The supplies are to be regarded as distinct and independent.
- The car hire and car seat hire are, from car seat customers’ perspective, neither so closely linked that they form a single, indivisible economic supply.
- The hire of the car seat is not an aim in itself but a means of better enjoying the car hire.
The appeal was allowed.
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Mixed supplies: Single or Multiple supply?
Where a business supplies mixed services it is important to establish whether this is a single supply or multiple supplies if different VAT rates may apply.
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