“The supply of anything comprised in the general items set out below, except – (b) a supply of anything comprised in any of the excepted items set out below, unless it also comprised in any of the items overriding the exceptions set out below which relate to that excepted item General Items Item no. 1. Food of a kind used for human consumption. Excepted Items Item no. 1. Ice cream, ice lollies, frozen yoghurt, water ices and similar frozen products, and prepared mixes and powders for making such products. 2. Confectionery, not including cakes or biscuits wholly or partly covered with chocolate or some other product similar in taste or appearance. Notes; (5) Items 2 and 3 of the items overriding the exceptions relate to item 2 of the excepted items; and for the purposes of item 2 of the excepted items “confectionery” includes chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any items of sweetened prepared food which is normally eaten with the fingers”
“The packaging of the product comprising of an external cardboard carton with the individual items packed loosely inside is obviously a cooking product as opposed to confectionery. I am sure nobody would buy it on the basis that they are purchasing chocolate flavoured buttons and this is reinforced by the fact that the buttons are unattractively packaged in a clear plastic bag. Additionally, the purchaser without reading the package or opening it would be unaware that the box contained chocolate flavoured buttons. The pricing of the item is also not commensurate with what a person would pay if they were seeking a bag of chocolate flavoured buttons only.”
“26. By its first two questions, which should be taken together, the national court essentially asks, with reference to a plan such as that offered by CPP to its customers, what the appropriate criteria are for deciding, for VAT purposes, whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be assessed separately. 27. It must be borne in mind that the question of the extent of a transaction is of particular importance, for VAT purposes, both for identifying the place where the services are provided and for applying the rate of tax or, as in the present case, the exemption provisions in the Sixth Directive. In addition, 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. 28. However, as the court held in Faaborg-Gelting Linien A/S v Finanzamt Flensburg (Case C-231/94 )[1996] STC 774 at 783,[1996] ECR I-2395 at 2411-2412, paras 12 to 14, concerning the classification of restaurant transactions, 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. 29. In this respect, taking into account, first, that it follows from art 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, second, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical customer, with several distinct principal services of with a single service. 30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplier (see Customs and Excise Comrs v Madgett and Baldwin (trading as Howden Court Hotel) ( Joined cases C-308/96 and C-94/97)[1998] STC 1189 at 1206, para 24). 31. In those circumstances, the fact that a single price is charged is not decisive. Admittedly, if the service provided to customers consists of several elements for a single price, the single price may suggest that there is a single service. However, notwithstanding the single price, if circumstances such as those described in paras 7 to 10 above indicated that the customers intended to purchase two distinct services, namely an insurance supply and a card registration service, them it would be necessary to identify the part of the single price which related to the insurance supply, which would remain exempt in any event. The simplest possible method of calculation or assessment should be used for this (see, to that effect, Madgett and Baldwin (at 1208, paras 45 and 46)). 32. The answer to the first two questions must therefore be that it is for the national court to determine, in the light of the above criteria, whether transactions such as those performed by CPP are to be regarded for VAT purposes as comprising two independent supplies, namely an exempt insurance supply and a taxable card registration service, or whether one of those two supplies is the principal supply to which the other is ancillary, so that it receives the same tax treatment as the principal supply.”
“[19] In the course of argument your Lordships were also referred, as were the court below, to a number of cases, both in this country and in the Court of Justice, which were decided before the Card Protection case. Submissions were made as to whether the principles upon which those cases were decided had application to this case. Their Lordships think that there is no advantage in referring to such earlier cases and their citation in future should be discouraged. The Card Protection case was a restatement of principle and it should not ne necessary to go back any further. [31] Besides raising the question of what authority a doctor would have to dispense drugs to patients who were not reg 20 patients, this approach seems to me to involve the kind of artificial dissection of the transaction which the Court of Justice warned against in its judgment in the Card Protection case [199] STC 270,[1999] ECR I-973 , para 29. In my opinion the level of generality which corresponds with social and economic reality is to regard the transaction as the patient’s visit to the doctor for treatment and not to split it into smaller units. If one takes this view, then in my opinion the correct classification is that which the NHS has always taken of the personal administration of drugs to non-reg 20 patients, namely that there is a single supply of services.”
“[30] In the course of this appeal there has been much discussion of para 30 of the ECJ’s judgment. in my opinion it is clear that this paragraph (which uses the introductory words ‘in particular’) is dealing with a particular case exemplified by Madgett and Baldwin . It is not asserting that every distinct element of a supply must be a separate supply for VAT purposes unless it is ‘ancillary’. ‘Ancillary’ means (as Ward LJ rightly observed ([2004] STC 1471 at [39]) subservient, subordinate and ministering to something else. It was an entirely apposite term in the discussion in British Telecommunications (where the delivery of the car was subordinate to its sale) and in Card Protection Plan itself (where some peripheral parts of a package of services, and some goods of trivial value such as label, key tabs and a medical card, were subordinate to the main package of insurance services). But there are other cases (including Faabord, Beynon and the present case) in which it is inappropriate to analyse the transaction in terms of what is ‘principal’ and ‘ancillary’, and it is unhelpful to strain the natural meaning of ‘ancillary’ in an attempt to do so. Food is not ancillary to restaurant services; it is of central and indispensable importance to them; nevertheless there is a single supply of services ( Faaborg ). Pharmaceuticals are not ancillary to medical care which requires the use of medication; again, they are of central and indispensable importance; nevertheless there is a single supply of services ( Beynon ). [31] This is the only point on which I can find any significant error in the approach of the tribunal. The evaluative findings which the tribunal made at paras 61-64 of its decision, set out above, were conclusions which were open to it on the evidence. The only error was the addition, in para 68, of the statement that the written materials were ancillary to the provision of education. The tribunal may have thought that authority required it to make this additional finding. In my view it was not necessary, nor (on any sensible use of the word ‘ancillary’) was it correct. But it did not invalidate the tribunal’s earlier conclusions, which were determinative of the matter. [32] Lightman J perceived this difficulty and sought to deal with it in para 34 of his judgment, which I have already quoted. But he seems, with respect, to have been hindered by the same perception that every case had to be squeezed into a matrix of what was ‘principal’ and what was ‘ancillary’. What the judge called ‘a component part of a single supply’ may be (in the fullest sense) essential to it – a restaurant with no food is almost a contradiction in terms, and could not supply its customers with anything – and yet the economic reality is that he restaurateur provides a single supply of services. Without the need to resort to gnomic utterances such as ‘the medium is the message’, the same sort of relationship exists between the educational services which the College provides to a student who takes one of its distance-learning courses and the written materials which it provides to the student. [33] Where ancillary goods or services are relevant to the analysis, Lightman J’s description of them as ‘add-on’ may be helpful, so long as it is borne in mind that they may be optional extras (such as in-flight catering on some but not all airlines) or goods or services which, although undoubtedly subsidiary, are for practical purposes indispensable (the ignition key of a car being a simple example). Experience (and the authority of the ECJ in Card Protection Plan (at para 27) both indicate that this is an area in which it is unwise to attempt any exhaustive schematic analysis.”