Colaingrove Ltd v Revenue And Customs

A reduced VAT rate for domestic fuel or power applies only to a supply of a description specified in Schedule 7A to the Value Added Tax Act 1994. It does not automatically apply to fuel forming part of a composite supply of another service, even where the fuel is used domestically and is a minor element. General VAT principles treat such a transaction as a single supply unless legislation clearly provides for segregation or apportionment. Domestic use is an eligibility characteristic, not a general use-based relief. Fiscal neutrality does not require identical treatment of materially different transactions, such as serviced holiday accommodation and a separate supply of power.

Colaingrove operated a holiday park and supplied static-caravan accommodation to Sun holidaymakers under a charge that included electricity for lighting, cooking and other purposes. HMRC treated the electricity as part of a composite supply of holiday accommodation, taxable at the standard rate.

The First-tier Tribunal allowed Colaingrove’s appeal. The Upper Tribunal reversed that decision in [2015] UKUT 80 (TCC), holding that the reduced-rate fuel charge did not apply to an element of a composite supply. The Court of Appeal considered the proper construction of Group 1 in Schedule 7A to the Value Added Tax Act 1994, and whether fiscal neutrality required a different result.

1. Disposition. Arden LJ gave the leading judgment, with Lindblom LJ and Henderson LJ agreeing. The appeal was dismissed and the Upper Tribunal’s decision upheld.
2. Statutory construction. Section 29A of the Value Added Tax Act 1994 applies the reduced rate to a supply of a description specified in Schedule 7A. The reference in section 5 to supplies in any form does not convert something that is not a supply for VAT purposes into a supply, nor does it give the word supply a variable contextual meaning. The fuel charge is therefore defined by the statutory description of the supply, not solely by the use made of the fuel.
3. Composite supply. Applying the principles in Card Protection Plan C-349/96, the electricity formed part of a single composite supply of holiday accommodation. Specific wording would be required before the legislation could apply the reduced rate to a component of that composite supply. The court applied the approach in Wm Morrison Supermarkets plc v Revenue and Customs Commissioners [2013] STC 2176 and approved the relevant reasoning in AN Checker Heating & Service Engineers v HMRC [2013] UKFTT 506.
4. Apportionment and purpose. The apportionment provisions in Schedules 7A and 8 did not authorise apportionment of the composite supply in question. Domestic use was a defining characteristic but not a sufficient condition for the relief. Parliament could rationally distinguish assistance to people in their homes from subsidising serviced holiday accommodation, and the courts could not add words to the legislation.
5. Fiscal neutrality and costs. Fiscal neutrality did not require the same treatment because the supply of holiday accommodation and the separate, optional supply of power to a caravan owner were different transactions. The appellant was ordered to pay HMRC’s costs on the standard basis, subject to detailed assessment if not agreed.

• Court of Appeal (Civil Division): Dismissed Colaingrove’s appeal and upheld the Upper Tribunal’s decision.
• Upper Tribunal (Tax and Chancery Chamber): In [2015] UKUT 80 (TCC), reversed the First-tier Tribunal’s decision and held that the reduced-rate fuel charge did not apply to electricity forming part of a composite supply.
• First-tier Tribunal: Allowed Colaingrove’s appeal against HMRC’s determination that the reduced rate did not apply.