An Checker Heating & Service Engineers
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 September 2013 |
| Neutral Citation | [2013] UKFTT 506 (TC) |
| Date | 24 September 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 506 (TC)
Judge Nicholas Paines QC.
Mr David Milne QC and Mr Charles Bradley, Counsel, instructed by McClure Naismith LLP, appeared for the Appellant
Miss Kerry Bretherton, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax - reduced rate - energy saving materials supplied as part of a supply of the whole or part of a domestic central heating system - whether a single supply subject to a single rate of VAT, a single supply subject to two or more different rates of VAT or two or more separate supplies subject to different rates of VAT - Appeal dismissed.
The First-tier Tribunal dismissed the taxpayer's appeal against a decision of HMRC that supplies comprising the installation of energy saving materials together with installation of a boiler or other central heating components was a single supply subject to a single rate of VAT.
The taxpayer carried on the business of installing boilers and central heating systems in residential accommodation. The installations included components which fell within the definition of "energy saving materials" in Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 7A group 2Sch. 7A, Grp. 2, Note 1. The taxpayer had accounted for VAT on the components, and on an apportioned element of the installation charges, at the reduced rate of five per cent. HMRC conducted an audit of the submitted returns and notified the taxpayer that, whilst energy saving materials would qualify for VAT at the reduced rate if they were installed independently, materials installed as part of a larger installation, such as a central heating system, were properly standard-rated. Assessments were issued and the taxpayer appealed. The issue for the tribunal was 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, in the alternative, two or more separate supplies subject to different rates of VAT.
HMRC's case was that the installation of energy saving materials together with the installation of a boiler or other central heating components was a single supply, in accordance with the principles set out in Card Protection Plan Ltd v C & E CommrsECAS (Case C-349/96) [1999] BVC 155 and other related cases, taxable at the standard rate. The taxpayer relied on the judgment of the European Court of Justice in EC Commission v FranceECAS (Case C-94/09) [2010] ECR I-4261, [2012] as establishing that the reduced rate 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 Ltd. The taxpayer accepted that the installation of a boiler or a central heating system was a single supply, but contended that it was subject to taxation at mixed rates, namely the reduced rate insofar as it comprised energy saving materials and the standard rate insofar as it did not.
The tribunal found that, to the extent that there was an issue of EU law in this case, the issue seemed to be 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 the EU Directive would allow the reduced rate to apply as a whole. The tribunal concluded 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 tribunal 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 reach a conclusion on whether the EC Commission v France line of authority would permit 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 tribunal was compelled to reach the conclusion that when the taxpayer installed energy saving materials along with a replacement boiler, or as part of the installation of a central heating system, it was making a standard-rated supply of which the energy saving materials were elements. That conclusion must follow, whether the taxpayer 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. In the judgment of the tribunal, 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.
This decision is likely to have wide application and will add to the growing list of authorities on the subject of composite supplies. Although the tribunal's reported 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, such as, for example, where the supply is made in the course of constructing a dwelling. More precisely, the tribunal's decision was that the supply of energy-saving materials could not benefit from the reduced VAT rate where those materials were part of a larger installation which did not qualify for the reduced rate. For commentary on the distinction between single and multiple supplies see the CCH VAT Reporter at 14-800.
[1]The business of the Appellant, which I shall refer to as "AN Checker", includes the installation in residential accommodation of boilers and central heating systems; the installations include components which, AN Checker contends, fall within the definition of "energy saving materials" in Value Added Tax Act 1994 schedule 7A group 2note 1 to Group 2 in Schedule 7A to the Value Added Tax Act 1994. I am not asked to decide whether that is the case, but to assume it for the purpose of giving a decision in principle on the issues raised by the appeal.
[2]The background to the appeal is that AN Checker has accounted for VAT on the components, and on an apportioned element of the labour charges applicable to their installation, at the reduced rate of 5% provided for by Value Added Tax Act 1994 section 29Asection 29A of the Act. In January 2009 HMRC conducted an audit of AN Checker's VAT returns and in February 2009 wrote to them expressing the view that, whilst the components would qualify for VAT at the reduced rate if they were installed "in their own right", where they were installed as part of a larger installation - such as of a boiler or a central heating system - the whole supply was standard-rated. HMRC subsequently raised an assessment in respect of AN Checker's accounting periods from 03/06 to 09/08.
[3]AN Checker sought a review of the decision, but it was upheld. In March 2009 a notice of appeal against the assessment was lodged at the Tribunal. From May of that year until February 2012 the appeal was stayed pending a decision in another case but, following the withdrawal of the appeal in that other case, AN Checker requested that its appeal be nominated as the new lead case. By an Order of 19 April 2012 the Tribunal designated this appeal as a lead case pursuant to rule 18 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, identifying the common or related issue of fact or law between it and other related appeals as:
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]HMRCs' case on this is, in short, that the installation of energy saving materials together with installation of a boiler or other central heating components is a single supply, in accordance with the principles set out in Card Protection Plan Ltd v C & E CommrsECAS (Case C-349/96) [1999] BVC 155 ("CPP") and other related cases, taxable at the standard rate. AN Checker's case relies on the CJEU's judgment in EC Commission v FranceECAS (Case C-94/09) [2010] ECR I-4261 (hereafter Commission v France (undertakers), to distinguish it from another Commission v France case) as establishing that the reduced rate provided for by Value Added Tax Act 1994 section 29A schedule 7A group 2s 29A and Group 2 of Schedule 7A applies to those elements of the supply that are energy-saving materials, regardless of whether they are elements of a single wider supply on CPP principles. I have concluded, with some regret, that HMRC's case succeeds.
[5]Directive 2006/112 contains a number of provisions that allow Member States to apply reduced rates of VAT, lower than the standard rate. eu-directive 2006/112 article 98Article 98 allows them to do so in respect of categories of supplies of goods or services listed in Annex III to the Directive; eu-directive 2006/112 article 102article 102 allows them to do so in the case of supplies of natural gas, electricity or district heating and eu-directive 2006/112 article 110...
To continue reading
Request your trial
-
Colaingrove Ltd (Appellant Appellant) v The Commissioners for HM Revenue and Customs
...with the FTT and by its order reversed that of the FTT. In terms of general approach, the UT applied the decision in AN Checker Heating & Service Engineers v HMRC [2013] UKFTT 506 (" Checker"). In that case, HHJ Paines QC decided that it had to be clearly shown that Parliament intended a re......
-
An Checker Heating & Service Engineers v Revenue and Customs Commissioners
...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......
-
OISE Ltd
...v France ECAS(Case C-94/09) [2010] ECR I-04261 (I discussed that case-law in my decision in AN Checker Heating & Service Engineers TAX[2013] TC 02895 and do not repeat the discussion here). It was the firm submission of both of them that I should not take that approach but should instead ap......
-
Envoygate (Installations) Ltd and Another
...plc v R & C CommrsVAT[2013] BVC 1672 and the recent decision of this tribunal in the case of AN Checker Heating & Service EngineersTAX[2013] TC 02895. HMRC argue that the cases on which the Appellants rely are concerned with the issue of whether a provision in national legislation which res......