Incidental to main supply

The taxpayer business installed central heating systems in residential properties. Some components fell within the definition of energy saving materials under VATA 1994 schedule 7A group 2 note 1.

The firm accounted for VAT at 5% on the components – which HMRC said were installed as part of a larger system meaning the whole supply should standard rated.

The taxpayer agreed that the installation of a central heating system was a single supply but claimed it was subject to VAT at mixed rates: standard for the main supply and reduced for the energy saving components.

The First-tier Tribunal said the taxpayer’s argument was “too extreme” and concluded that the business was making a standard-rated supply of which the energy savings parts were elements.

The taxpayer’s appeal was dismissed.

Independent VAT consultant Neil Warren said “There have been some strange mixed supply tribunal decisions in the past 12...