Revenue Note for Guidance

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Revenue Note for Guidance

47. Composite and multiple supplies

Summary

This section provides for rules on how the supply of a package comprising two or more elements, each potentially attracting VAT at different rates, is treated for VAT purposes. In general, the rules provide that in a multiple supply, where items are capable of being sold independently, each item is taxable at the rate that would apply if it were sold separately. In a composite supply, on the other hand, VAT is chargeable at the rate applicable to the principal element.

Details

(1) Subject to the “two thirds rule” in section 41 –

  • (1)(a) For a composite supply, i.e. where there is a principal element to which the other elements are ancillary, the VAT rate will be the rate applying to the principal element.
  • (1)(b) For a multiple supply, i.e. where a number of individual supplies are made together for a single consideration, the consideration will be apportioned between the various supplies involved, and each supply will be taxed at the appropriate VAT rate.

(2) The provisions governing composite and multiple supplies also apply to the intra-Community acquisition of goods received from other Member States.

(3) Subsection (3) provides for the making of Regulations – see Regulation 12 of the VAT Regulations 2010. For example, there is a de-minimis rule, under which an accountable person may chose to disregard an individual supply or supplies in a multiple supply where the cost to the supplier does not exceed 50% of the total tax exclusive consideration or €1 whichever is the lesser. The maximum value of all the supplies that can be disregarded is €1.

Examples:

  • The sale of a food hamper that contains goods which, if sold separately, would be taxable at 0%, 13.5% and 23%. This is a multiple supply. Each of the differently rated elements is taxed as an individual supply at the rate appropriate to it. The consideration must be apportioned to reflect the taxable amount applicable to each rate.
  • The supply of a mobile phone (23% VAT) with an instruction booklet (0% VAT). This is a composite supply; the booklet is ancillary. The rate applicable to the principal supply (23%) applies to the entire supply, regardless of how the consideration is allocated by the supplier.

Relevant Date: Finance Act 2020