Talacre Beach Caravan Sales Ltd v Customs & Excise

Where a Member State exercises the derogation in Article 28(2)(a) of the Sixth Directive by zero-rating specified goods but expressly excludes identified items, the interaction between that exclusion and the single-supply principle raises an EU-law question. It is not merely a matter of construing domestic legislation. The Court of Appeal therefore considered a reference desirable where the answer might have repercussions beyond the particular dispute. It referred whether a single supply of the specified goods together with excluded items prevents standard-rate VAT on the excluded items. The reference did not determine the substantive VAT question.

The appellant sold new large static caravans with standard fitted and removable contents for a single price. The United Kingdom’s domestic zero-rating provision treated caravans as zero-rated but excluded removable contents other than specified goods.

The VAT and Duties Tribunal found a single supply, standard-rated the consideration attributable to excluded items, and zero-rated the balance. Lindsay J upheld that approach, holding that a single supply could bear different VAT rates where otherwise the domestic derogation would be extended. On a second appeal, the central issue was whether the single-supply finding required the whole transaction to be zero-rated and whether the issue should be referred to the European Court of Justice.

Disposition. Lord Justice Peter Gibson directed that a question be referred to the European Court of Justice under section 234 of the EC Treaty. Lord Justice Rix agreed. The reference concerned the interaction between a single supply and an express domestic exclusion from zero-rating; it did not decide the substantive VAT issue.

1. EU-law issue. The Court held that the case did not raise merely the scope and construction of domestic legislation. The issue concerned the effect of a derogation permitted by Article 28(2)(a) of the Sixth Directive, and the relationship between that derogation and the single-supply principle.
2. Statutory context. Schedule 8, Group 9 of the Value Added Tax Act 1994 zero-rated caravans but, by note (a), excluded removable contents other than goods within item 4 of Group 5. The referred question asked whether a single supply of the caravan together with excluded items prevented standard-rate VAT being charged on the excluded items.
3. Reference. The Court agreed with Lindsay J and with the view apparently taken by Chadwick LJ that a reference was desirable. Guidance was appropriate because the question might have repercussions beyond the particular dispute. The question was settled in amended terms during the hearing, and counsel were directed to agree the formal order and lodge the material required by the Part 68 Practice Direction.
4. Costs. The costs of the hearing were ordered to be costs in the case. Both parties had initially opposed a reference and had later altered their positions, while a hearing remained necessary to obtain and formulate the reference.

1. Court of Appeal (Civil Division): On the second appeal, referred a question concerning VAT treatment of excluded items in a single supply to the European Court of Justice.
2. High Court of Justice, Chancery Division: Lindsay J agreed with the VAT and Duties Tribunal that different VAT rates could apply to elements of a single supply and decided the case without making a reference.
3. VAT and Duties Tribunal: Found that the sale of the caravan with its contents was a single supply, standard-rated the consideration attributable to excluded items, and zero-rated the balance.