Composite Supplies

Blue Chip Hotels Limited (“Blue Chip”) appealed against HMRC’s decision to assess the business for approximately £55,000, which represented VAT that should have been charged on the supply of the hire of a room (“The Tamarisk Room”) in which civil wedding ceremonies were undertaken over a 3 year period. The Appellant argued that the supply made was one of land and therefore, should be exempt from VAT.


The basis of HMRC’s argument was that, if the customer hired the room solely to stage a wedding and the supply made consisted of no other wedding services provided by Blue Chip, then this would qualify as single supply of a license to occupy land. However, as Blue Chip provided a wedding package which included the hire of other rooms and catering services, the entire supply would be liable to the standard rate of VAT.

 

In order to clarify whether a single supply of land or a composite (mixed) supply of a wedding package had been provided it was considered whether the elements of said supply “are so closely linked that they form objectively a single indivisible economic supply which it would be artificial to split”.

 

It was determined by the First-Tier Tribunal that as the Tamarisk Room was utilised to stage the wedding ceremony and it is possible, if not common, to hold the ceremony and reception at different locations, coupled with the fact that the invoice showed a separate charge for the Tamarisk room and no other goods or services were supplied with the room itself (all food and drink was served in other rooms), it’s supply should be treated as separate for VAT purposes.  However, the supply of the Tamarisk room was deemed not to be a VAT exempt supply of land on the grounds that part of letting land is that the lessee has the “right to exclude others” however in Wedding Regulations it is stated that the public should be granted admittance and so the Appellant did not have the right to grant exclusive use of the room to their customer. The appeal was therefore dismissed and the supply of Tamarisk room was not

 

This decision suggests that the VAT exemption may never apply to the rental of a room in which a wedding ceremony will take place.  If you or your client believe that supplies made could qualify as a composite supply, the VAT liability of the entire supply is determined by the principal element. To ensure the correct VAT rate is being applied the supplies made by your business that may consist of one or more element, speak to someone on our free VAT helpline today.

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