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'THE SINGLE VERSUS multiple supplies debate gets more and more complicated,' I observed.
'You mean the arguments about whether an all in price covers a single supply or two or more at different rates of VAT? I thought that, what with the various cases which have gone to the High Court and the European Court of Justice, matters were getting sorted out with some principles defined,' rejoined the Busy Practitioner.
'THE SINGLE VERSUS multiple supplies debate gets more and more complicated,' I observed.
'You mean the arguments about whether an all in price covers a single supply or two or more at different rates of VAT? I thought that, what with the various cases which have gone to the High Court and the European Court of Justice, matters were getting sorted out with some principles defined,' rejoined the Busy Practitioner.
'So did I, but think about this one. Games Workshop Ltd (16975) sells its Warhammer games in boxed sets which include miniature plastic figures, various items used to play the game including some cards, dice and a book. Is that a single or a multiple supply?'
'Sounds like a single supply because the book will be instructions about how to play the game and therefore ancillary to the latter, and merely a means of better enjoying it.'
'What if the book has 288 pages and, besides the rules, it contains extensive explanations and stories about the fantasy world of Warhammer, and it is sold separately for £25?'.
'Ah, right; if it has a separate existence, it must amount to a different supply from the rest of the game.'
'That's what I would have said and it is what has generally been accepted for many years by both Customs and the tribunals. Consider the situations of subscriptions and courses for instance. A subscription to a club or professional body, which includes a magazine or journal, has always been seen as partly zero rated. In contrast, a training course cannot be partly zero rated merely because it includes printed notes. Ordinary course notes are ancillary to the supply of the course, as was held in Computeach International Ltd (12115). The notes usually do not have a separate existence, even if the course organiser offers them for sale after the event.
'However, in situations where the course fee has included a published book, the latter has been accepted as a zero rated supply. Indeed, in Force One Training Ltd (13619), a tribunal held that the manuals supplied to course students were zero rated, because they were physically and economically dissociable from the tuition, despite the fact that they were not sold separately.
'The Warhammer tribunal held that all the elements in the boxed sets were interdependent and did not have separate identities because they were all used to play the war game. No reasonable person could in those circumstances consider that the main book had a distinct and separate identity.'
'How could it say that, given that the book is distinct both physically and economically because it is sold independently?'
'Well, Warhammer is not a game which one can pick up in a few minutes. It is based on far more than a few rules; one has to read much of the book in order to understand what fantasy war games are about and how to play. Games Workshop has created a complete fantasy world, which amounts to a gaming cult for boys of 12 to 16.'
'But does not the very complexity and the fact that one has to study it in detail in order to take part in that cult reinforce the argument that the book is an item separate from the miniatures with which one plays the game?', asked the Busy Practitioner.
'Not according to the tribunal; it accepted Custom's argument that the book was an integral part of the hobby. To split the supply of it from that of the contents would be artificial because each depended upon the other. The essential feature of the transaction was the supply of a war game. All the elements in the boxed sets were interdependent and did not have separate identities because they were all used to play that game.'
'But if the book does not have a separate identity merely because it is sold with other items, why is it zero rated when sold on its own? What difference between the book and the miniatures makes the book zero rated when it is bought separately?'
'Ah,' I said. 'That is the kind of subtle distinction which earns large fees for consultants like myself!
'The "formula" proposed by Customs and accepted by the tribunal based on the decided cases is as follows. What are the essential features of the transaction? What does a typical customer seek to get? What is he paying for? Viewing the transaction objectively, what are its elements? Which of those elements constitute for a reasonable customer an aim in themselves? Are any remaining elements merely a means of better enjoying one of the dominant ones which is an aim in itself? Does that remaining element take up no more than a marginal portion of the package price? If so, it is likely to be subsumed into the dominant element so as to lose its own fiscal identity. One can take the price structure into account but it is not determinative.
'In applying that formula to this problem, has the tribunal been led by Customs down a blind alley? Supposing that the logic is sound, the consequences are curious.
'This seems to me to be another example of Customs needlessly complicating the tax. Until now, a book has been self-evidently a book. Now it seems that we will have to consider carefully its contents and the context in which it is sold. Take computer software and those fat instruction manuals; must the vendor offer the two separately for the manual to be zero rated?'
A St J Price FCA is a VAT consultant in Gloucestershire. He may be contacted on 01285 851888; fax: 01285 851889; e-mail: asjprice@aol.com.
