Liability of children craft activity boxes containing zero rate and standard rate goods – mixed supply or single standard rate supply

Summary from KPMG

Decision First Tier Tribunal

Following a review of assessments HMRC had conceded that the taxpayer’s “Super” and “Grande” boxes, which included books, were mixed supplies. However, they maintained that the “Petite” box, which included a magazine, was a single standard rated supply. The taxpayer appealed.

Survey evidence from buyers of the box, said by the taxpayer to be the “typical consumer” whose point of view is so important in supply cases, was submitted to show 91% considered the magazine important and that if it was available separately they would on average be prepared to pay £2.50 for it (about half the total price of the box). Only 1% of buyers responded to the survey though, so HMRC challenged whether these responders were typical consumers but the FTT was happy to accept the taxpayer’s statistics based approach. The FTT considered the two elements of crafts and magazine were not so inextricably linked that it would be artificial to split them. They are not dependent on each other. On balance, on the basis of the principles in the various supply cases, in particular the 12 principles in Middle Temple, there were two supplies, one of which was zero rated. The taxpayers appeal was therefore allowed.

 

Source Tribunal

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