UT/2024/000002 - [2025] UKUT 00188 (TCC)

For VAT purposes every supply must normally be regarded as distinct and independent. It is well-established in the relevant jurisprudence that supplies can nevertheless exist which, although comprised of different elements, amount to a single composite supply. There is no dispute between the parties on the FTT’s summary of the case-law and the relevant legal principles those set forth. It is convenient, in order to understand the terms and structure of the FTT’s subsequent reasoning, to set out the legal principles, which are well-rehearsed in any number of cases, by reference to the authorities the FTT referred to.

In that regard, the FTT referred principally to the summaries set out in the FTT decision of Spectrum Community Health CIC v HMRC [2022] UKFTT 237 (TCC) and in the Upper Tribunal’s decision in R (oao Gloucestershire Hospitals NHS Foundation Trust) v HMRC [2023] UKUT 28 (TCC) (‘Gloucestershire Hospitals’).

As pointed out in those cases the CJEU caselaw has established there are two types of single composite supply.

This appeal is principally concerned with Levob supplies(although it is useful to mention CPP because as will be seen one of CBNA’s arguments refers to the fact that some of the contractual material sought to incorporate the application of the CPP test).

In Gloucestershire Hospitals the UT found it helpful to break the Levob formulation into the following elements. The FTT adopted a similar approach (at [116]):

The UT in Gloucestershire Hospitals went on to address those questions with the CJEU’s analysis in Frenetikexito – Unipessoal Lda v Autoridale Tributaria e Aduaneria (Case C-581/19) (‘Frenetikexito’) in mind. There, the CJEU had set out the criteria to be considered when a Levob type supply was in issue and where the Advocate General’s opinion in that case was specifically approved. Both were conveniently summarised by the FTT (Judge Sinfield) in Spectrum Community Health CIC v HMRC (‘Spectrum FTT') at [51] to [53] as follows:

“In paragraphs 22 to 33 of her opinion, which were specifically approved by the CJEU, the Advocate General (Kokott) in Frenetikexito set out how to determine whether a bundle of goods and services is a Levob type single supply. The first step is to ascertain the essential features or characteristic elements of the transaction from the perspective of the ‘typical consumer’, ie the typical recipient of the supply. The perspective of the typical consumer is to be determined according to the generally accepted view, ie the understanding of the general public. The Advocate General then identified four “indications” which should be considered from the perspective of the typical consumer. These are:

(1)

Indivisibility of the elements of the supply, ie do the individual elements of the supply merge into a new distinct supply such that, in the generally accepted view, there is only a single supply?

(2)

Separate availability of the supplies, ie are the different elements that make up the supply available separately or must the customer take all the elements together?

(3)

Indispensability of the elements of the supply for the aim of the supply, ie does the transaction have a single economic aim or is the combination of different elements important to the typical recipient of the supplies?

(4)

Separate invoicing as an indication that supplies are divisible, ie is there a single invoice and price for all the elements or are they invoiced and/or charged separately? “

As to the CJEU’s decision, Judge Sinfield noted:

“52.

The CJEU condensed the Advocate General’s observations into a single paragraph as follows (cases references removed):

“39 … it is necessary to identify the characteristic elements of the transaction in question from the perspective of the average consumer. The body of evidence relied on for this purpose comprises various elements, the first of which, being of an intellectual nature and of decisive importance, seek to establish whether or not the elements of the operation in question are indivisible and its economic purpose, whether or not this is unique, and the second of which, being of a substantive nature and not of decisive importance, support, where appropriate, the analysis of the first elements, such as separate access or joint access to the services in question or the existence of a single invoice or a separate invoice.”

53.

Although the CJEU endorsed the Advocate General’s analysis, it went further than she did. The CJEU did not call two of the matters to be considered, ie indivisibility and indispensability, “indications” but described them as “of decisive importance” while assigning the other two elements only a supporting, and not decisive, role.”

As regards the relevance of any contractual agreement to whether a given transaction amounts to single supply or multiple supplies, there is again no dispute between the parties. The analysis of the transaction depends on the economic realities. However, the contract is the starting point for that and the court only goes behind that if the contract does not reflect the true agreement between the parties. (The FTT referred to statements of Whipple LJ in Mainpay Ltd v HMRC [2023] STC 30, Lord Neuberger in HMRC v Airtours Holidays Transport Ltd [2016] STC 1509 and Arden LJ as she then was in ING Intermediate Holdings Ltd v HMRC [2018] STC 339 to that effect.)