BB/2A/01 European Court ruling clarifies whether transactions are single or multiple supplies for VAT
Business Brief, Issue 2. 15 February 2001
This business brief sets out Customs' policy as to whether a transaction consists of a single composite supply or two or more independent supplies for VAT purposes. This follows the judgments of the European Court (ECJ) and (on 31 January 2001) the House of Lords in the case of Card Protection Plan  STC 174 [Part V10], as to whether a transaction consists of a single composite supply or two or more independent supplies.
While indicating that, having regard to the diversity of commercial operations, it is not possible to give exhaustive guidance on how to approach the problem correctly in all cases, the ECJ did lay down a number of tests to be applied.
The ECJ tests
As its starting point, the ECJ relies on its earlier judgment in Faaborg-Gelting Linien  STC 774 [Part V11], where it held that, where the transaction in question comprises a bundle of features and acts, regard must first be had to all the circumstances in which that transaction takes place.
At the same time, two fundamental principles must be taken into account. Every supply must be regarded as distinct and independent, and a supply which comprises a single supply from an economic point of view should not be artificially split, so as to distort the functioning of the VAT system. With all this in mind, the essential features of the transaction must be ascertained in order