An Checker Heating & Service Engineers v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 September 2018 |
| Neutral Citation | [2018] UKUT 292 (TCC) |
| Date | 14 September 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2018] UKUT 0292 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mrs Justice Rose, Judge Andrew Scott
David Milne QC and Charles Bradley, Counsel, instructed by Harper Macleod LLP appeared for the appellant
Marika Lemos, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondent
Value added tax – Reduced-rating – Energy-saving materials supplied as part of a single composite supply – Whether the whole of the supply standard-rated or whether a component of the supply subject to a reduced rate of VAT – VATA 1994, Sch. 7A, Grp. 2 – Company's appeal dismissed.
The Upper Tribunal (UT) dismissed the company's appeal against the decision of the First-tier Tribunal (FTT) ([2013] TC 02895) that (1) standard-rating applied to supplies comprising the installation of energy-saving materials together with the installation of a boiler (or other central-heating components) and (2) there was a one supply which was subject to a single rate of VAT (the standard rate).
The Company installed boilers and central-heating systems in residential accommodation. The installations included components which fell within the definition of energy-saving materials in VATA 1994, Sch. 7A, Grp. 2, Note 1. The Company had accounted for VAT on the components, and on an apportioned element of the installation charges, at only the reduced rate of 5%. HMRC decided that, although energy-saving materials qualified for reduced-rating if they were installed independently, materials installed as part of a larger installation, such as a central heating system, were standard-rated.
The FTT considered whether the installation of energy-saving materials together with services of installation of a boiler or other central heating products comprised:
- a single supply subject to a single rate of VAT; or
- a single supply subject to two or more different rates of VAT; or
- two or more separate supplies subject to different rates of VAT.
HMRC argued that the installation of energy-saving materials together with the installation of a boiler or other central heating components was a single supply, following the principles in Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] BVC 155, and taxable at the standard rate. The Company relied on EC Commission v France (Case C-94/09) [2010] ECR I-4261 as establishing that reduced-rating applied to those elements of the supply that were energy-saving materials, regardless of whether they were part of a single wider supply under principles established in Card Protection Plan. The Company accepted that the installation of a boiler or a central heating system was a single supply, but contended that it was liable at mixed rates, namely the reduced rate insofar as it comprised energy-saving materials and the standard rate insofar as it did not.
The FTT held that, to the extent that there was an issue of EU law, the issue was whether the EC Commission v France line of authority allowed a member state to apply a reduced rate to energy-saving materials when supplied as part of a wider supply, if that wider supply was not one to which EU law allowed reduced-rating to apply as a whole. The FTT held that it was not required to answer that question, since, even where EU law did allow a reduced rate to be applied to an element of a wider supply, a separate issue arose as to whether the national VAT legislation did so. In EC Commission v France, it was accepted that the national law did so. The FTT considered, as a matter of construction, whether VATA 1994 applied a reduced rate to the supply and installation of energy-saving materials when provided as part of a wider supply of installation of a boiler or a central heating system. Since the legislation did not do this, it was not necessary to decide whether the EC Commission v France line of authority permitted a member state to apply a reduced rate in this way.
Having considered various authorities and submissions on the construction of the relevant legislation, the FTT held that when the Company installed energy-saving materials along with a replacement boiler, or as part of the installation of a central-heating system, it made a standard-rated supply, of which the energy-saving materials were elements. That conclusion must follow, whether the Company was installing an individual energy-saving item, such as a thermostat, or a larger item, such as a boiler, into which energy-saving materials such as insulation had been incorporated by the manufacturer. The FTT held that the supply of the installation of energy-saving materials together with services of installation of a boiler or of a central heating system constituted a single supply subject to a single rate of VAT at the standard rate.
The UT agreed with the FTT that the supply of installing energy-saving materials, with service of installing a boiler or of a central heating system, was one supply subject to a single rate of VAT (the standard rate). The UT held that the lack of an apportionment provision in VATA 1994, Sch. 7A indicates that a component of a single supply did not attract the reduced rate (para. 49 and 56 of the decision). The UT noted that such apportionment provisions were elsewhere when detailing the supplies that benefit from one. Also, the UT commented on the difficulties in calculating the VAT due if apportionment applied (para. 59 of the decision). The lack of express words in Sch. 7A indicated that the whole supply must be as specified before reduced-rating applies. Thus, standard-rating applied to the whole supply.
The appeal was designated as a lead case under r. 18 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273). This decision adds to the list of authorities on the subject of composite supplies. Although the decision was that the supply of energy-saving materials as part of the wider installation of a boiler or central heating system was a single supply subject to a single rate of VAT at the standard rate, this does not remove the supplier's entitlement to zero-rate the whole supply where appropriate, e.g. where the supply is made in the course of constructing a dwelling.
[1] This is an appeal that turns on whether or not, as a matter of construction, Group 2 of Sch.7A to the Value Added Tax Act 1994 (“VATA 1994”) applies a reduced VAT rate to a component of what is, for VAT purposes, otherwise regarded as a single supply.
[2] An appeal was brought by AN Checker Heating & Service Engineers (“AN Checker”) against VAT assessments issued by HMRC for the periods 03/06 to 09/08. At the material time AN Checker made supplies of installing boilers or central heating systems in residential accommodation. AN Checker asserted that a component of those supplies comprised the installation of energy-saving materials.
[3] The appeal was designated as a lead case pursuant to rule 18 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273). The common or related issues of fact or law were:
Whether the supply of the installation of energy saving materials together with services of installation of boiler and other central heating products is a single supply subject to [a] single rate of VAT or is a single supply subject to two or more different rates of VAT or, in the alternative, are two or more separate supplies subject to different rates of VAT.
[4] The First-tier Tribunal (Judge Nicholas Paines QC) dismissed the appeal by a decision given on 24 September 2013 ([2013] TC 02895) determining at [48] the rule 18 issue as follows:
The supply of the installation of energy saving materials together with services of installation of a boiler or of a central heating system is a single supply subject to a single rate of VAT at the standard rate.
[5] Later that year the FTT granted permission to appeal against its decision
[6] The parties then agreed that the appeal should be stayed behind an appeal to the Upper Tribunal in R & C Commrs v Colaingrove Ltd [2015] BVC 510, a case that concerned Group 1 of Sch.7A to VATA 1994 and the extent to which a component of a single supply could benefit from a reduced rate of VAT. The stay was continued when the Upper Tribunal's decision was in turn appealed to the Court of Appeal ([2017] BVC 19) (“Colaingrove (CA)”). The Court of Appeal upheld HMRC's assessments.
[7] Article 12(3)(a) and Annex H(9) of Council Directive 77/388/EEC (“the Sixth Directive”) conferred on member states a power to apply reduced VAT rates to the “supply, construction, renovation and alteration of housing provided as part of a social policy”. The relevant provisions of the Sixth Directive were re-enacted as Article 98 and Annex III(10) of Council Directive 2006/112/EC (“the PVD”).
[8] In exercising the power to derogate from the ordinary VAT system, the UK Parliament conferred relief in July 1998 in respect of the installation and supply of energy-saving materials. This was effected by way of amendment to what was then Sch. A1 to VATA 1994 (the operative effect of which was governed by what was then s.2(1A) of that Act). The expression “energy-saving materials” was defined as insulation for walls, floors, ceilings, roofs or lofts or for water tanks, pipes or other plumbing fittings; draught stripping for windows and doors; central heating system controls; and hot water system controls. The relief was confined to supplies made to “qualifying persons”, defined as someone aged 60 or over or receiving certain social security benefits. It was also provided that the relief applied only to the extent that the consideration for it was met by a grant made under a particular type of public scheme.
[9] The Finance Act 2000 made changes to the system of reduced rates (see s.135 of, and Sch.35 to, that Act, and it is worth noting that, on...
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AN Checker Heating and Service Engineers v The Commissioners for HM Revenue and Customs
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