Ever bought a Toucan activity box? Ever wondered what the VAT treatment was? Well, wonder no more as this has been decided in the First Tier Tax Tribunal (FTT).
The case
Toucan activity boxes contain a magazine and craft supplies for children.
The taxpayer considered these to be a mixed supply of a zero-rated magazine and standard-rated craft supplies so the proceeds from each sale should be apportioned between the two elements.
HMRC considered these to be a single, standard-rated supply of craft supplies and sought a payment of underpaid VAT from the taxpayer, raising an assessment of almost £700,000.
The decision
The FTT found in favour of the taxpayer, that this was a mixed supply:
- The magazine and crafts were capable of being sold separately and were either currently available for separate purchase or had been in the past.
- A customer survey had shown that buyers considered the boxes to be a supply of a magazine and crafts, not just a supply of crafts.
- The FTT felt that both the magazine and the crafts were distinct and separate elements, both as important as the other.
Further information
Working out the correct VAT Rate to apply to your supplies is crucial in determining your liability.
This can be especially tricky when you supply combinations of items with different VAT Rates and need to decide whether you are making a single supply with a single VAT rate, or a mixed supply with different rates applied. This can be an issue for services as well as for goods.
If you have any questions about VAT on mixed supplies or any other issue please contact me.
If you want to look at the case itself, here’s the link: Dodadine Ltd t/a ToucanBox v HMRC (2019) UKFTT TC07505
