Single or Multiple Supplies: United Kingdom Tax Tribunal Clarifies

Abstract

Taxability of supply is dependent upon the attributes of the transaction. Often the transaction is an amalgam of multiple considerations flowing between the parties. In such cases a question arises whether the transaction constitutes a single supply or multiple supplies form part of such transaction. The relative positioning of each of the considerations in the transaction coupled with their distinctiveness determines the extent to which the transaction is to be dissected for the purpose of determining whether it constitutes a single supply versus a situation of multiple supplies. This has implications for the taxability of the transaction in a Value Added Tax (‘VAT’) regime. It is, therefore, essential to determine the exact contours of the transaction by tracing the diverse considerations flowing between the parties and thereafter to position them relatively in order to appreciate whether the supply in question is a single one or is in an amalgam of a multiple supplies.

A recent decision of the United Kingdom First Tier Tribunal (Tax Chamber) in the case of Harley Davidson Europe Ltd. (2017) UKFTT 873 (TC) is instructive on this aspect inasmuch as it addresses in detail both, (a) the legal principles and (b) the economic tests, to determine whether a transaction constitutes a single supply or is an amalgam of multiple supplies. The Tribunal further applied these principles and tests to a complex situation of transaction between a group and its subscribers to factually delineate the nature of the supply. In this case the Tribunal addressed the taxability of the subscription charges received by the group to resolve the dispute whether these charges represented one single supply or were against multiple supplies. The decision of the Tribunal has implications on variety of aspects in the context of a VAT regime and in particular the characterization of the transaction for the purposes of taxing the supplies embedded therein. This paper analyzes this decision in detail and also positions its impact in respect of similar legal provisions under the Indian Goods and Services Tax (GST) regime.

Keywords: Supply, Single Supply, Multiple Supplies, Value Added Tax, VAT, GST

JEL Classification: H25, K34