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bigduckontax, Accountant
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I have a query regarding the treatment of a supply of goods

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I have a query regarding the treatment of a supply of goods for VAT purposes when there are different elements included in a single supply (i.e. zero rated and standard rated items together).
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to ba able to help you with your question. What is your particular problem, please?
Customer: replied 1 year ago.
I have a query regarding the treatment of a supply of goods for VAT purposes when there are different elements included in a single supply (i.e. zero rated and standard rated items together).Background - I am starting a subscription box business for children. Customers will receive a box through the post each month which essentially includes a children's fiction book of 2 characters who go back in time each month to a different period in history. Customers will sign up to receive this monthly, and can cancel at any time.The box will include the following on a monthly basis:
• Fiction book
• History booklet (with activities e.g. word searches etc. also in it) relating to the period of history in the fiction book
• A6 sized card with codes on it to be used to solve puzzles in the booklet (e.g. in Ancient Egypt box - a card with Hieroglyphs on it)
• Bookmark
• Stickers
• Colouring Sheets
• A "collectible" - essentially a small toy (e.g. a small statute, a keyring, a pen quill or something else related to the period in history in the book)
• A craft will also be included - e.g. clay and paints to make something that is described in the story.In the first month the following 2 free items will also be included:
• A map and timeline (A1 sized wall map, with timeline)
• A pack of colouring pencilsMy question is whether this could be treated as a single zero-rated supply, as the principal element of the box is the fiction book and history booklet and all of the other elements are a means of better enjoying the principal goods supplied - the books.For instance, I know that you can buy books packaged with a cuddly toy and this is treated as a single zero-rated supply as the cuddly toy is ancillary to the enjoyment of the main supply (the book).
Expert:  bigduckontax replied 1 year ago.
Here is the basic position from HMRC Notice VBOOKS6000 which gives four alternatives viz: 'The standard-rated article may be an ancillary part of the supply of zero-rated printed matter. The whole supply is thus zero-rated.The zero-rated printed matter may be an ancillary part of the supply of the standard-rated article. The whole supply is thus standard-rated.There may be a multiple supply, where two or more articles are distinct and independent. Here, if the articles are sold for a single price, apportionment will be necessary where the articles are liable to different rates of VAT.There may be a single, composite supply, where there are no principal elements of the supply but all elements are integral to one another. The supply will be liable to a single rate of VAT.' You should really read this notice which you will find here: I would submit that the supplies you set out in your question would be zero rated under the first option. I do hope that you find my reply resolves your conundrum.
Customer: replied 1 year ago.
Hi Keith,
Thank you for your response. I agree with you that when you initially read the notice it seems that the product is essentially the 2 books and the other bits and pieces should be treated as ancillary and so the whole package is zero rated. When you read further down though, there are contradictory parts e.g.Distinguishing between multiple and single suppliesYou will probably find that the most difficult problem is to distinguish between multiple supplies and single supplies. Sometimes it is easy to identify a multiple supply: common examples are books issued with films or tapes, and children’s colouring books issued with felt-tip pens. It is quite possible to use the film or tape independently of the book, and indeed they need separate equipment to use them. Similarly, a child can use a felt-tip pen on any paper of its choice - it is sold with a colouring book as a marketing device.However, one area which has caused problems is children’s activity packs. These may contain zero-rated books or booklets as well as standard-rated jigsaw puzzles or toys. You will need to decide whether the omission of any one component part would diminish the pack as a whole. We cannot give overall guidelines on these activity packs as each one is different, and must be judged on its merits. However, for general guidance on single and multiple supplies you may find it helpful to consult VATSC - Supply and consideration. This gives details of several tribunal decisions which have distinguished between single and multiple supplies.Based on this, you could argue that (like the felt tip pens on a magazine described) you could use the ancillary items for other purposes, yet you could also argue that "omission of any one component would diminish the pack as a whole" as they are "not an aim in itself but a better way of enjoying the principal activity (which is the books)". What are your thoughts on this?Also, what is the procedure? If I read and document everything and say that I believe it is a single zero-rated supply as the other items are ancillary to the books. If in the future the business was doing well, do I just wait until HMRC challenge my belief (and I suppose I would retrospectively be charged for any VAT that I should have been standard rating? and could end up with a VAT bill)Thanks
Customer: replied 1 year ago.
Or am I over-thinking this and should just go with that it is zero-rated?!
Expert:  bigduckontax replied 1 year ago.
I fear that you are over thinking. In my opinion your supplies are zero rated. Please be so kind as to rate me before you leave the Just Answer site.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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