© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
C6. Ancillary supplies
GENERAL
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- No absolute rule for determining
"[19] None the less, there is no absolute rule for determining the extent of a supply from the point of view of VAT, and consequently, to determine the extent of a supply, all the circumstances must be taken into consideration (see CPP, paragraph 27)." (Field Fisher Waterhouse LLP C-392/11)
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- Purely objective enquiry
"[18] Moreover, in certain circumstances, several formally distinct services, which could be supplied separately and thus give rise, in turn, to taxation or exemption, must be considered to be a single transaction when they are not independent. Such is the case for example, where, in the course of a purely objective analysis, it is found that there is a single supply 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 services which share the tax treatment of the principal service. In particular, a service must be regarded 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 supplied (Part Service, paragraphs 51 and 52 and case-law cited)." (RLRE Tellmer Property C-572/07)​
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Effect of being an ancillary supply​
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- Examine characteristic elements of the transaction concerned
"[18] In view of the two circumstances that, first, every supply must normally be regarded as distinct and independent and, secondly, a transaction which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the characteristic elements of the transaction concerned must be examined in order to determine whether the supplies constitute several distinct principal supplies or one single supply (see, to that effect, CPP, paragraph 29; Levob Verzekeringen and OV Bank, paragraph 20; Aktiebolaget NN, paragraph 22; Everything Everywhere, paragraphs 21 and 22; and Bog and Others, paragraph 53)." (Field Fisher Waterhouse LLP C-392/11)
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- Ancillary supplies share VAT treatment of principal supply
"[25] As the Commission has argued in its written observations, that latter question should be interpreted as seeking to establish which supply, of the loan or of the goods, determines the regime applicable to the integrated cooperation operation. Indeed, since ancillary supplies share the VAT treatment of the principal supply (judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 24), if the grant of a loan constituted the principal supply, the entire transaction would be exempt from VAT by virtue of Article 135(1)(b) of the VAT Directive." (Stock 94 C-208/15)
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"[11] ... By contrast, as the Court indicated in Card Protection, at para 30, an element is properly to be regarded as ancillary where it is not the principal supply but is accessory to it and so shares the tax treatment of the principal supply..." (College of Estate Management v. HMRC [2005] UKHL 62)
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- Nature of being ancillary means that dispensing with separate treatment does not jeopardise VAT system
"[37] In the case of such negligible ancillary supplies, dispensing with a separate VAT assessment cannot jeopardise the differentiated system of the VAT Directive. For the sake of practicability, a single transaction should therefore be taken to exist. In addition, the principle of fiscal neutrality, which precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes, does not require transactions to be split in this situation. ( 39 ) There is no competitive situation where the supplier can make the accessory ancillary supply only depending on the principal supply." (Frenetikexito C-581/19 AG Kokott)
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- Hence the relevance of whether element has substantial effect on price charged
"[24] However, as the Advocate General notes in point 36 of his Opinion, traders such as hoteliers who provide services habitually associated with travel frequently make use of services bought in from third parties which take up a small proportion of the package price compared to the accommodation and are among the tasks traditionally entrusted to such traders. Those bought-in services do not therefore constitute for customers an aim in itself, but a means of better enjoying the principal service supplied by the trader.
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[26] Where, however, a hotelier habitually offers his customers, in addition to accommodation, services which go beyond the tasks traditionally entrusted to hoteliers, and which cannot be carried out without a substantial effect on the package price charged, such as travel to the hotel from distant pick-up points, such services are not to be equated with purely ancillary services." (Madgett and Baldwin C-308/96)
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"[39] There can be no objection to the equal treatment of the ancillary supply and the principal supply where the extent of the ancillary supply is actually negligible. ( 40 ) For this reason, the Court establishes the limit for an independent supply where the supply cannot be made without a substantial effect on the total price charged and the costs are not confined to a marginal share. ( 41 )" (Frenetikexito C-581/19 AG Kokott)
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- Fiscal neutrality does not require splitting
"[31] That conclusion cannot be undermined by the principle of fiscal neutrality inherent in the common system of VAT, which precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, inter alia, Case C‑94/09 Commission v France [2010] ECR I‑0000, paragraph 40, and Case C‑58/09 Leo-Libera [2010] ECR I‑0000, paragraph 34), since Everything Everywhere’s situation is entirely different from that of an economic operator which provides financial services to its clients as the principle supply." (Everything Everywhire Ltd C-276/09)
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"[37] In the case of such negligible ancillary supplies, dispensing with a separate VAT assessment cannot jeopardise the differentiated system of the VAT Directive. For the sake of practicability, a single transaction should therefore be taken to exist. In addition, the principle of fiscal neutrality, which precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes, does not require transactions to be split in this situation. ( 39 ) There is no competitive situation where the supplier can make the accessory ancillary supply only depending on the principal supply." (Frenetikexito C-581/19 AG Kokott)
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IDENTIFYING ANCILLARY SUPPLIES​
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- Supplies that does not constitute for customers an end in itself but a means of better enjoying the principal service
"[22] Second, an economic transaction constitutes a single supply where one or more elements are to be regarded as constituting the principal supply, while, by contrast, other elements are to be regarded as one or more ancillary supplies which share the tax treatment of the principal supply (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 40 and the case-law cited).
[23] It follows from the Court’s case-law that the first criterion to be taken into consideration in this respect is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 41 and the case-law cited)." (Deco Proteste C-505/22)
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"[27] Furthermore, in certain circumstances, several formally distinct services, which could be supplied separately and thus give rise, separately, to taxation or exemption, must be considered to be a single transaction when they are not independent (see Case C‑425/06 Part Service [2008] ECR I‑897, paragraph 51; RLRE Tellmer Property, paragraph 18; Case C‑461/08 Don Bosco Onroerend Goed [2009] ECR I‑11079, paragraph 36; and Everything Everywhere, paragraph 23).
[28] Such is the case particularly where one or more elements are to be regarded as constituting the principal supply, while other elements are to be regarded, by contrast, as one or more ancillary supplies which share the tax treatment of the principal supply. In particular, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (see, inter alia, CPP, paragraph 30; Case C‑34/99 Primback [2001] ECR I‑3833, paragraph 45; RLRE Tellmer Property, paragraph 18; Everything Everywhere, paragraphs 24 and 25; and Bog and Others, paragraph 54). " ​(Purple Parking Ltd C-117/11)
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- "In particular" where a means of better enjoying principal supply
"[17]...In particular, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied ..." (Field Fisher Waterhouse LLP C-392/11)
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"[18] Moreover, in certain circumstances, several formally distinct services, which could be supplied separately and thus give rise, in turn, to taxation or exemption, must be considered to be a single transaction when they are not independent. Such is the case for example, where, in the course of a purely objective analysis, it is found that there is a single supply 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 services which share the tax treatment of the principal service. In particular, a service must be regarded 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 supplied (Part Service, paragraphs 51 and 52 and case-law cited)." (RLRE Tellmer Property C-572/07)​
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- Ancillary means subservient, subordinate to something else
"[30]..."Ancillary" means (as Ward LJ rightly observed at [2004] STC 1471, 1482, para 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 labels, key tabs and a medical card, were subordinate to the main package of insurance services)..." (College of Estate Management v. HMRC [2005] UKHL 62)
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- Ancillary supplies are clearly divisible, but ancillary supply only has auxiliary function
"[35] Unlike in the case of a single complex supply, dividing a bundle of supplies into a principal and an ancillary supply does not give rise to any artificial splitting. The principal supply and the ancillary supply are clearly divisible from one another. Dependent ancillary supplies, however, are merely accessory in relation to the principal supplies related to them. ( 37 ) The ancillary supply does not have a distinct function, but only an ‘auxiliary’ function." (Frenetikexito C-581/19 AG Kokott)
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- Negligible ancillary supplies where supplier can make ancillary supply only depending on principal supply
"[37] In the case of such negligible ancillary supplies, dispensing with a separate VAT assessment cannot jeopardise the differentiated system of the VAT Directive. For the sake of practicability, a single transaction should therefore be taken to exist. In addition, the principle of fiscal neutrality, which precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes, does not require transactions to be split in this situation. ( 39 ) There is no competitive situation where the supplier can make the accessory ancillary supply only depending on the principal supply." (Frenetikexito C-581/19 AG Kokott)
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- Ancillary supply must be a distinct supply not a different use of the same supply
"[32] However, it must be observed that, in fact, the United Kingdom does not distinguish a principal element from an ancillary element in the supply at issue in the main proceedings, but merely distinguishes two uses of the set of services provided by the Aladdin platform, namely one consisting of the management of special investment funds and the other consisting of the management of other funds." (BlackRock Investment Management (UK) Ltd C-231/19)​​
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(1) ABSENCE OF DISTINCT AIM
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- Absence of distinct purpose from perspective of average consumer
[23] It follows from the Court’s case-law that the first criterion to be taken into consideration in this respect is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 41 and the case-law cited)." (Deco Proteste C-505/22)
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"[41] It follows from the Court’s case-law that the first criterion to be taken into consideration in this respect is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 2 July 2020, Blackrock Investment Management (UK) ,C‑231/19, EU:C:2020:513, paragraph 29 and the case-law cited)." (Frenetikexito C-581/19)
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- Economic aim can be achieved only in combination with the principal supply
"[41] Furthermore, it is a typical characteristic of dependent ancillary supplies that the recipient of the supply does not have a distinct economic interest in them. ( 44 ) From an economic point of view, they merely serve to complement and supplement the principal supply and are therefore normally a consequence of that supply. ( 45 ) Their economic aim can be achieved, from the perspective of the typical consumer, only in combination with the principal supply." (Frenetikexito C-581/19 AG Kokott)
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- Provision of infrastructure to pay for main supply does not satisfy distinct aim of customer
"[27] With regard to the main proceedings, it is to be noted that the principal service supplied to its customers by a provider such as Everything Everywhere is a mobile telephone service. The activity engaged in by that undertaking in invoicing for that service, in particular making available to customers an infrastructure enabling them to pay bills not only by Direct Debit or by BACS transfer, but also by credit card, cheque or cash does not constitute for those customers an aim in itself. The supposed supply of services, which those customers are unable to access separately from the use of the mobile telephone service, can offer such consumers nothing that is independent of that service. It offers them only the opportunity to pay mobile telephone bills using the method of payment that appears to them to be most convenient and, moreover, enables the provider of the services to increase the volume of the service it supplies as its main service (see, to that effect, Primback, paragraph 47)." (Everything Everywhere C-276/09)
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- Obtaining additional services not a distinct end for average tenant
"[8] The lease concluded between FFW and the landlord provides that the premises are let in consideration of the payment of three ‘rents’. These correspond, first, to occupation of the premises, secondly, to FFW’s share of the cost of insuring the building and, thirdly, to the provision of services which the landlord is obliged under the lease to provide. This third type of rent consists in charges due in return for supplies of services (‘the service charges’) including among other things the supply of water, heating throughout the building, repair of the structure and machinery of the building (including the lifts), cleaning of the common parts, and the security of the building. The lease provides that if the tenant fails to pay those three rents the landlord can terminate the lease.
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[23] ... Moreover, it should be observed that the leasing of immovable property and the supply of associated services, such as those mentioned in paragraph 8 above, may objectively constitute such a supply. Obtaining the services concerned cannot be regarded as constituting an end in itself for an average tenant of premises such as those at issue in the main proceedings, but constitutes rather a means of better enjoying the principal supply, namely the leasing of commercial premises." (Field Fisher Waterhouse LLP C-392/11)
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- Fitness training and nutrition monitoring have distinct aims
"[48] As regards the applicability to services such as those at issue in the main proceedings of the second type of exception, referred to in paragraphs 40 to 42 of this judgment, it is important, in the present case, to note, on the one hand, the autonomous purpose of the dietary monitoring service from the perspective of the average consumer. Even if such dietary monitoring services were provided or could be provided in the same sports premises as physical well-being and fitness services, the purpose of the former is not a sporting one, but a health and aesthetic one, notwithstanding the fact that a dietary regime may have the effect of contributing to athletic performance." (Frenetikexito C-581/19)
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(2) MEANS OF BETTER ENJOYING
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- Not enough that both supplies serve common purpose (or about relative importance in serving common purpose)
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"[44] Moreover, in its judgment of 8 July 1986, Kerrutt (73/85, EU:C:1986:295, paragraphs 12 and 15), the Court, hearing the question of whether the supply of building land and the subsequent construction on that land of a new building, as provided for in a framework contract, were to be classified as a single transaction, took account of the fact that, first, the transaction relating to the land and, second, supplies of property and services constituted legally distinct transactions carried out by different contractors. In the light of those factors, it held that, despite the economic links between all the transactions at issue and their common purpose, which consisted of the construction of a building on the land acquired, it was not appropriate, in the circumstances of that case, to classify them as a single transaction." (KPC Herning C-71/18)
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"[18] It follows that, in principle, each individual supply must be assessed separately for VAT purposes. This holds even where there are certain links between multiple supplies because they pursue a single economic aim." (Frenetikexito C-581/19 AG Kokott)
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Nutrition monitoring not ancillary to fitness training
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"[46] Thus, subject to verification by the referring court, it appears that physical well-being and fitness services, on the one hand, and nutrition monitoring, on the other, as provided by the applicant in the main proceedings, are not indivisibly linked within the meaning of the case-law referred to in paragraphs 38 and 39 of this judgment.
[47] Supplies such as those at issue in the main proceedings should therefore be regarded, in principle, as not constituting a single supply of a complex nature.
[48] As regards the applicability to services such as those at issue in the main proceedings of the second type of exception, referred to in paragraphs 40 to 42 of this judgment, it is important, in the present case, to note, on the one hand, the autonomous purpose of the dietary monitoring service from the perspective of the average consumer. Even if such dietary monitoring services were provided or could be provided in the same sports premises as physical well-being and fitness services, the purpose of the former is not a sporting one, but a health and aesthetic one, notwithstanding the fact that a dietary regime may have the effect of contributing to athletic performance." (Frenetikexito C-581/19)
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"[57] The recipient of the supply also has a distinct economic interest in nutrition advice. As has already been pointed out, the economic aim of a dependent ancillary supply can be achieved only in combination with its related principal supply. That is not quite the case here. The fitness service is not crucial to the aim of healthy nutrition pursued by the nutrition advice service. Healthy nutrition and sufficient physical activity are both elements of a healthy lifestyle but, in the generally accepted view, cover different areas of life. The nutrition advice service does not therefore merely complement the fitness service." (Frenetikexito C-581/19 AG Kokott)
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- Pursuing common economic aim and increasing efficiency of other supply not sufficient
"[48] If, as in this case, the applicant offers nutrition advice alongside fitness services, both services pursue a common economic aim. Both are likely to boost physical well-being and athletic performance. Using one increases the efficiency of the other.
[49] Contrary to the assertion made by Portugal, however, it does not necessarily follow that the fitness and nutrition services, which are supplied, at least predominantly, on the basis of a single contractual relationship, are to be regarded as a single transaction. The mere economic links between two supplies are not sufficient to outweigh the fundamental independence of each individual supply (see above, point 18)." (Frenetikexito C-581/19 AG Kokott)
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- Prior service not a means of better enjoying supply where supply could not be enjoyed at all without prior service
"[161] We remind ourselves that as established in EC Commission v. United Kingdom (see paragraph 19 above) the supply of corrective spectacles is economically dissociable from the provision of the service. We do not take Mr McGurk to dispute that; although HMRC’s position has changed from its original contentions in its statement of case that the dispensing services in this case were purely administrative, Mr McGurk now accepts that they are professional services albeit not amounting to medical care. As we have found that the delivery of the services is effected in a manner which is comparable to that provided on the High Street we have no hesitation in concluding that there are two separate supplies, the supply of the dispensing services (however characterised) and the supply of the corrective spectacles. In Southport Vision Plus which revisited the separate supply issue following Card Protection Plan the clear finding was that customers knew that they have to pay for the services of the dispensing optician and it was not a service provided so as to “better enjoy” the optical appliance; it could not be enjoyed at all without the dispensing service." (Prescription Eyewear Limited v. HMRC [2013] UKFTT 357 (TC), Judge Herrington)
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- Service that is indispensable to whole not ancillary
"[27] In the context of the portfolio management service at issue in the main proceedings, those two elements are therefore not only inseparable, but must also be placed on the same footing. They are both indispensable in carrying out the service as a whole, with the result that it is not possible to take the view that one must be regarded as the principal service and the other as the ancillary service.
[28] Consequently, those elements must be considered to be so closely linked that they form, objectively, a single economic supply, which it would be artificial to split." (Deutsche Bank AG C-44/11)
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- Two services supplying things that would both be necessary to enjoy the other unlikely to be ancillary
"[26]...(3) Given the nature of the supplies at issue in this appeal, we consider that the Levob line of authority is more relevant. Since skating cannot be enjoyed without both access to an ice rink and a pair of ice skates, the question of which element of a skating with skates package is “principal” and which is “ancillary” is unlikely to be of much assistance in determining whether the skating with skates package involves single or multiple supplies." (HMRC v. The Ice Rink Company Limited [2019] UKUT 108 (TCC), Judges Jonathan Richards and Cannan)
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- Different services of equal importance not ancillary
"[33] Furthermore, it is not clear from the order for reference that it is possible to distinguish within the supply provided by a platform, such as that at issue in the main proceedings, principal and ancillary supplies. The services of analysing markets, monitoring performance, evaluating risk, monitoring regulatory compliance and implementing transactions correspond to successive steps, all of which are equally necessary to allow investment transactions to be made under good conditions. Consequently, such a supply must be regarded as a single supply comprising various elements of equal importance." (BlackRock Investment Management (UK) Ltd C-231/19)​​
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- Complex installation not ancillary to supply of goods
"[29] It follows from the decision for reference that the laying of the cable at issue in the main proceedings requires the implementation of complex technical procedures and the use of specialised equipment and specific knowledge, and appears not only inseparable from delivery of the goods in such a wide-ranging transaction but also vital to the later use and exploitation of those goods. It follows that the laying of that cable is not merely an element ancillary to its supply.
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[36] It is also clear from the decision for reference that if the laying of the cable at issue in the main proceedings is carried out in normal circumstances, the turnover which the supplier will achieve from the transaction is mainly composed of the cost of the cable itself and the rest of the material, which represents 80 to 85% of the total amount thereof, whereas if the conditions are unfavourable, for example because of difficult terrain, the state of the seabed, the need to extend the cable or the occurrence of storms, the proportion of the cost of materials to the total cost decreases.
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FACTORS
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Invoicing and pricing
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- Invoicing and pricing arrangements not determinative
"[57] In the case of supplies in connection with a party catering business such as that at issue in the main proceedings in Case C‑502/09, it may be noted inter alia that the existence of a single transaction is independent of whether the caterer issues a single invoice covering all the elements or issues a separate invoice for the supply of the food (see, to that effect, CPP, paragraph 31; Levob Verzekeringen and OV Bank, paragraph 25; and Everything Everywhere, paragraph 29)." (Bog C-497/09)
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"[25] The fact, highlighted in the question, that separate prices were contractually stipulated for the supply of the basic software, on the one hand, and for its customisation, on the other, is not of itself decisive. Such a fact cannot affect the objective close link which has just been shown with regard to that supply and that customisation nor the fact that they form part of a single economic transaction (see, to that effect, CPP, paragraph 31)" (Levob C-41/04)
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"[29]...But, as Lord Hope of Craighead said in the British Telecommunications Plc case, at p1385, the fact that a price for the supply in question can be separately identified is not determinative." (Benyon v. HMRC [2004] UKHL 53)
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"On the authorities it is clear that the fact that one "package price" is charged without separate charge for individual supplies being specified does not prevent there being two separate supplies for VAT purposes. In my opinion the fact that separate charges are identified in a contract or on an invoice does not on a consideration of all the circumstances necessarily prevent the various supplies from constituting one composite transaction nor does it prevent one supply from being ancillary to another supply which for VAT purposes is the dominant supply." (CCE v. British Telecommunications Plc [1999] UKHL 3)
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- Separate identification of price has no decisive influence
"[29] The fact, highlighted in the eighth question, that a separate price for the alleged financial service is identified as such in the contract document and itemised separately in the invoices issued to customers is not of itself decisive. According to the case-law of the Court, the fact that a single price is invoiced, or that separate prices were contractually stipulated, has no decisive significance for the purposes of determining whether it is necessary to find that there are two or more distinct and independent transactions or only a single economic transaction (see, to that effect, CPP, paragraph 31, and Case C-41/04 Levob Verzekeringen and OV Bank [2005] ECR I‑9433, paragraph 25)." (Everything Everywhere C-276/09)
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- Will normally account for a small part of the price
"[24] However, as the Advocate General notes in point 36 of his Opinion, traders such as hoteliers who provide services habitually associated with travel frequently make use of services bought in from third parties which take up a small proportion of the package price compared to the accommodation and are among the tasks traditionally entrusted to such traders. Those bought-in services do not therefore constitute for customers an aim in itself, but a means of better enjoying the principal service supplied by the trader." (Madgett and Baldwin C-308/96)
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"[11]...Not surprisingly, in Commissioners of Customs and Excise v Madgett and Baldwin (C-308/96 and C-94/97) [1998] ECR I-6229, 6259, para 24, the Court envisaged that the ancillary supply would account for a small proportion of the price of the transaction as a whole and would not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied by the trader..." (College of Estate Management v. HMRC [2005] UKHL 62)
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- Respective values of the components may provide supporting evidence (one is minimal/marginal)
"[24] The second criterion, which in fact constitutes evidence of the first, is that account should be taken of the respective value of each of the benefits making up the economic transaction, one being minimal or even marginal in relation to the other (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 42 and the case-law cited)." (Deco Proteste C-505/22)
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"[42] The second criterion, which in fact constitutes evidence of the first, is that account should be taken of the respective value of each of the benefits making up the economic transaction, one being minimal or even marginal in relation to the other (see, to that effect, judgment of 22 October 1998, Madgett andBaldwin, C‑308/96 and C‑94/97, EU:C:1998:496, paragraph 24)." (Frenetikexito C-581/19)
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- Supply that cannot be made without substantial effect on total price not ancillary/would distort purpose of treating as one supply
"[28] However, it should be noted in that regard that where a trader such as iSt habitually offers its customers travel services, in addition to services associated with the language training and education of its customers, which cannot be carried out without a substantial effect on the package price charged, such as travel to the host State and and/or the stay in that State, such services are not to be equated with purely ancillary services. As is clear from the order for reference, the services in question do not represent a marginal share in relation to the corresponding services associated with the language training and education which iSt offers its customers." (iSt internationale C-200/04)
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"[39] There can be no objection to the equal treatment of the ancillary supply and the principal supply where the extent of the ancillary supply is actually negligible. ( 40 ) For this reason, the Court establishes the limit for an independent supply where the supply cannot be made without a substantial effect on the total price charged and the costs are not confined to a marginal share. ( 41 )" (Frenetikexito C-581/19 AG Kokott)
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- 40% of invoiced price is clearly not minimal
"[48]...On the other hand, as the Advocate General pointed out in point 56 of her Opinion, in the case in the main proceedings, according to the applicant's invoice, 40% of the total monthly consideration payable by the client was attributable to nutritional advice, a percentage which clearly cannot be described as minimal or, a fortiori, marginal. Dietary monitoring services such as those at issue in the main proceedings cannot therefore be regarded as ancillary to the main services which constitute physical well-being and fitness services." (Frenetikexito C-581/19)
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- Price for further supply depending on consumption suggests separate supply
"[45] Thus, in a case such as that at issue in the main proceedings, which, according to the information provided at the hearing, concerns the letting of a large number of immovable properties intended to be used for various purposes ranging from a hangar to use as housing by a tenant, it is important to ascertain in the context of each letting whether, with respect to utilities, the tenant is free to determine his own levels of consumption. In that regard, the existence of individual meters and billing according to the amount of the goods used is a factor of importance which suggests that the provision of utilities should be regarded as constituting separate supplies from the letting. So far as concerns refuse collection, if the tenant has the choice of supplier or may conclude a contract directly with the supplier, even if, for reasons of convenience, he does not exercise that choice or option, but obtains the service from the supplier designated by the landlord on the basis of a contract concluded between the landlord and the supplier, that circumstance points to the existence of a supply separate to the letting. If, in addition, the amount due for refuse collection and that due under the letting are itemised separately on the invoice, it must be considered that the landlord does not provide a single supply consisting of the letting and that supply." (Wojskowa Agencja C-42/14)
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Contractual terms
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- Supplied under single contract not relevant
"[19] The contractual structure in question is likewise irrelevant. ( 10 ) The VAT assessment of a transaction cannot depend on the contractual arrangements available under national civil law. If, as is the case here to some extent, multiple supplies are made on the basis of a single contract under civil law, this does not call into question the independence of those supplies for VAT purposes." (Frenetikexito C-581/19 AG Kokott)
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- Contractual terms may be important (e.g. lease also providing for additional services)
"[23] For the purposes of that examination, the content of a lease may be a factor of importance in assessing whether there is a single supply. In the main proceedings, it appears that the economic reason for concluding the lease is not only to obtain the right to occupy the premises concerned, but also for the tenant to obtain a number of services. The lease accordingly designates a single supply agreed between the landlord and the tenant..." (Field Fisher Waterhouse LLP C-392/11)
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- Fact that contract for main supply can be terminated if consideration for lesser supply not paid support ancillary status but not decisive
"[28]...The fact that the lease gives the landlord the right to terminate it if the tenant fails to pay the service charges supports the view that there is a single supply, but does not necessarily constitute the decisive element for the purpose of assessing whether there is such a supply..." (Field Fisher Waterhouse LLP C-392/11)
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Separate availability/potential for separate suppliers
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- Services that can be separated and are invoiced separately factor against
"[22] It is, moreover, undisputed that the cleaning services of the common parts of an apartment block can be supplied in various ways, such as, for example, a third party invoicing the cost of the service direct to the tenants or by the landlord employing his own staff for the purpose or using a cleaning company.
[23] It should be noted that, in this case, RLRE Tellmer Property invoices the cleaning services to the tenants separately from the rent.
[24] Also, since the letting of apartments and the cleaning of the common parts of an apartment block can, in circumstances such as those at issue in the main proceedings, be separated from each other, such letting and such cleaning cannot be regarded as constituting a single transaction within the meaning of the case-law of the Court." (RLRE Tellmer Property C-572/07)​
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- But fact that services could in principle be supplied separately not decisive
"[26] As to the relevance of the fact that a third party could in principle supply certain services, it must be observed that the existence of such a possibility is not decisive in itself either. As may be seen from the Court’s case-law, the possibility that elements of a single supply may, in other circumstances, be supplied separately is inherent in the concept of a single composite transaction, as explained in paragraph 15 above (see, to that effect, order in Purple Parking and Airparks Services, paragraph 31)." (Field Fisher Waterhouse LLP C-392/11)
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"[43] A dependent ancillary supply is not precluded by the fact that it could also, theoretically, be made by a third party, for example where a tenant receives electricity directly from the electricity supplier. ( 49 ) Rather, the fact that a third party can theoretically make the supply is inherent in the concept of the transaction consisting of an ancillary supply and a principal supply. ( 50 )" (Frenetikexito C-581/19 AG Kokott)
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- Actual ability to choose alternative supplier is a factor against single supply
"[39] First, if the tenant has the right to choose his suppliers and/or the terms of use of the goods or services at issue, the supplies relating to those goods or services may, in principle, be considered to be separate from the letting. In particular, if the tenant can determine his own consumption of water, electricity or heating, which can be verified by the installation of individual meters and billed according to their consumption, supplies relating to those goods or services may, in principle, be considered to be separate from the letting. As regards services, such as the cleaning of the common parts of a building under joint ownership, such services should be regarded as separate from the letting if they can be organised by each tenant individually or by the tenants collectively and if, in all cases, the supply of those goods and services is itemised separately from the rent on invoices addressed to the tenant.
[40] In this scenario, the mere fact that the non-payment of rental charges allows the landlord to terminate the rental agreement does not prevent the services to which those charges relate from constituting services separate from the letting (see, to that effect, judgment in BGŻ Leasing, C‑224/11, EU:C:2013:15, paragraph 47).
[41] Furthermore, the fact that the tenant has the right to obtain those services from the provider of his choice is also not in itself decisive, since the possibility that elements of a single supply may, in other circumstances, be supplied separately is inherent in the concept of a single composite transaction (judgment in Field Fisher Waterhouse, C‑392/11, EU:C:2012:597, paragraph 26)." (Wojskowa Agencja C-42/14)
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EXAMPLES
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Ancillary
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- Delivery, shipment and packaging
"[36] Typical examples of ancillary supplies in the supply of goods are packaging or shipment. The latter supplies of services do not have the importance of a distinct principal supply because they serve only to fulfil the actual purpose of the contract. The same holds, for example, where the provider makes available, for consideration, different payment methods." (Frenetikexito C-581/19 AG Kokott)
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"In my view here if the transaction is looked at as a matter of commercial reality there was one contract for a delivered car: it is artificial to split the various parts of the transaction into different supplies for VAT purposes. What B.T. wanted was a delivered car; the delivery was incidental or ancillary to the supply of the car and it was only on or after delivery that property in the car passed. The fact that delivery could have been arranged differently under a separate contract between B.T. and the transporter or by B.T. collecting the car itself does not mean that when there is a contract for a delivered car the two supplies must be kept separate. Of course B.T. had the option to make other arrangements as is argued but the fact is that B.T. did it this way as part of one contract and in my view as part of one supply." (CCE v. British Telecommunications Plc [1999] UKHL 3)
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- Short distance transport services provided by hotelier
"[24] However, as the Advocate General notes in point 36 of his Opinion, traders such as hoteliers who provide services habitually associated with travel frequently make use of services bought in from third parties which take up a small proportion of the package price compared to the accommodation and are among the tasks traditionally entrusted to such traders. Those bought-in services do not therefore constitute for customers an aim in itself, but a means of better enjoying the principal service supplied by the trader." (Madgett and Baldwin C-308/96)
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"[40] If, for example, a hotelier offers his guests a transportation service from local airports and the cost of that service represents only a negligible proportion in comparison with accommodation, the supply is, as a rule, purely ancillary. Ultimately, transportation is a traditional task of the hotelier, which is a means of better enjoying the principal supply. ( 42 ) The situation may be assessed differently, however, in the case of a distant pick-up point or a transfer to an excursion destination, where the transport service has a substantial effect on the total price charged. ( 43 )" (Frenetikexito C-581/19 AG Kokott)
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- Free tablet or smartphone was ancillary to magazine subscription as it was designed to increase subscribers and provided means of accessing main service
"[27] However, the circumstances of the case in the main proceedings appear to illustrate, as it will be for the referring court to determine, a main supply accompanied by an ancillary supply, within the meaning of the case-law referred to in paragraphs 22 to 24 of the present judgment. The fact that the applicant in the main proceedings gives a subscription gift to new subscribers constitutes an incentive to subscribe. Its sole purpose is to increase the number of subscribers to the magazines published by that applicant and, consequently, to increase its profits. Moreover, it follows from the order for reference that the applicant in the main proceedings, in its commercial calculation, takes account of the fact that some subscribers will terminate their subscription after payment of the first monthly instalment, which allows them to keep the gift without being obliged to remain subscribers. The fact remains that the subscription gift enables the applicant in the main proceedings to increase significantly the number of its subscribers each year. The provision of such a gift therefore has no distinct purpose from the point of view of the average consumer, who agrees to pay at least one month’s subscription in order to obtain the gift.
[28] In addition, both the applicant in the main proceedings and the European Commission rightly point out in their observations that the subscription gift offered for the years 2015 to 2018 enabled new subscribers to benefit, under the best possible conditions, from the service provider’s main service, namely the reading of the magazines for which the subscription was taken out, in so far as a tablet and a smartphone make it possible, for example, to consult a digital version of those magazines.
[29] Consequently, subject to examination by the referring court, it appears that the subscription to those magazines, on the one hand, and the offer of a tablet or a smartphone with a unit value of less than EUR 50 for each new subscription, on the other, form a whole, with the subscription constituting the principal supply and the gift an ancillary supply the sole purpose of which is to encourage the purchase of a subscription."​ (Deco Proteste C-505/22)
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- Payment handling ancillary to supply of service being paid for
"[30] It follows that Everything Everywhere’s customers who pay their mobile telephone bills using one of the payment methods which incur the SPHC do not intend to purchase two distinct supplies, namely a supply of a mobile telephone service and a supply whose purpose is to handle their payments. From the customer’s point of view, the supply of payment handling services supposedly provided by the telecommunications services provider to its customers at the time those services are paid for using certain payment methods must, in the circumstances such as those of the main proceedings, be regarded for VAT purposes, as being ancillary to the principal supply of those telecommunications services (see, by analogy, Joined Cases C‑308/96 and C‑94/97 Madgett and Baldwin [1998] ECR I‑6229, paragraphs 24 and 25)." (Everything Everywhere C-276/09)
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- Supply of credit (if there is one) is ancillary to supply of goods
"[44] With regard to the transaction concluded between Primback and the final consumer, which alone is relevant in the main proceedings, it should be added that, even if it were possible to distinguish the supply of services, allegedly consisting in the supply of credit, from the supply of goods, the former supply would, in circumstances such as those in issue in the main proceedings, have to be construed as being in any event ancillary to the principal transaction consisting of the sale of goods." (Primback Ltd C-34/99)
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But see VWFS, below.
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- Provision of loan to allow borrower to buy goods from lender is ancillary to supply of goods
"[34] In the third place, it is apparent from the order for reference that the delivery of the current assets and the loan pursue the same economic objective, namely, in essence, the creation of financial and logistical support for farmers, enabling them to carry on agricultural production activity. In that regard, it should be recalled that, according to the general conditions governing the integrated cooperation at issue in the main proceedings, as they are set out in brief in the order for reference, Stock ‘94 undertook to support the production activity of the integrated producers and to finance the purchase of the current assets necessary for that purpose.
[35] In such circumstances, the supply of those current assets constitutes, for the integrated producers, the principal supply within the integrated cooperation, inasmuch as the farmers will be able to pursue their agricultural activity because of those assets. Thus, for those farmers, obtaining a loan to acquire those assets is not an end in itself, but merely a means for them to acquire the current assets necessary for their agricultural production." (Stock 94 C-208/15)
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Not ancillary (complex supply)​
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- Additional services compulsorily supplied by landlord for service charge ancillary to lease
"[8] The lease concluded between FFW and the landlord provides that the premises are let in consideration of the payment of three ‘rents’. These correspond, first, to occupation of the premises, secondly, to FFW’s share of the cost of insuring the building and, thirdly, to the provision of services which the landlord is obliged under the lease to provide. This third type of rent consists in charges due in return for supplies of services (‘the service charges’) including among other things the supply of water, heating throughout the building, repair of the structure and machinery of the building (including the lifts), cleaning of the common parts, and the security of the building. The lease provides that if the tenant fails to pay those three rents the landlord can terminate the lease.
[...]
[23] ... Moreover, it should be observed that the leasing of immovable property and the supply of associated services, such as those mentioned in paragraph 8 above, may objectively constitute such a supply. Obtaining the services concerned cannot be regarded as constituting an end in itself for an average tenant of premises such as those at issue in the main proceedings, but constitutes rather a means of better enjoying the principal supply, namely the leasing of commercial premises." (Field Fisher Waterhouse LLP C-392/11)
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- Printed material/book not ancillary to supply of education - it is the main means by which education provided
"[11] ... After all, the tribunal found as a fact that the average student was expected to spend about 94% of his time using the printed materials. Taken together, the remaining elements, including face-to-face teaching and sitting examinations, counted for only 6% of the average student's time. Supplying the printed materials for the students to study was therefore, by far, the main method by which the College provided them with an education...In the present case, however - leaving aside any allocation of a proportion of the price - it would be highly artificial, to say the least, to describe the printed materials as nothing more than a means for the students the better to enjoy the education supplied by the College. In reality, those materials were the means by which the students obtained most of their education." (College of Estate Management v. HMRC [2005] UKHL 62)
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In Weight Watchers it was common ground that the printed handbook was not ancillary to the weight loss group therapy sessions
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"[24] After setting out the facts found by the Tribunal [paragraph 3] and the relevant VAT rules [paragraphs 4 to 7], Morgan J considered the legal tests to be applied. He pointed out [paragraph 11] that no one suggested that the principal/ancillary test was relevant to the facts of this case but that it was common ground that the appropriate test is what he described as "the artificial to split test" [paragraph 12]..." (HMRC v. Weight Watchers (UK) Limited [2008] EWCA Civ 715 - held single complex supply)
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- Pharmaceuticals are not ancillary to medical care
"[30] 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)." (College of Estate Management v. HMRC [2005] UKHL 62)
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- Portfolio management services and sales and purchases to give effect to advice both indispensable, neither ancillary
"[33] Furthermore, it is not clear from the order for reference that it is possible to distinguish within the supply provided by a platform, such as that at issue in the main proceedings, principal and ancillary supplies. The services of analysing markets, monitoring performance, evaluating risk, monitoring regulatory compliance and implementing transactions correspond to successive steps, all of which are equally necessary to allow investment transactions to be made under good conditions. Consequently, such a supply must be regarded as a single supply comprising various elements of equal importance." (BlackRock Investment Management (UK) Ltd C-231/19)
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"[27] In the context of the portfolio management service at issue in the main proceedings, those two elements are therefore not only inseparable, but must also be placed on the same footing. They are both indispensable in carrying out the service as a whole, with the result that it is not possible to take the view that one must be regarded as the principal service and the other as the ancillary service.
[28] Consequently, those elements must be considered to be so closely linked that they form, objectively, a single economic supply, which it would be artificial to split." (Deutsche Bank AG C-44/11)
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- Complex installation of fibre optic cable not ancillary to supply of materials
"[29] It follows from the decision for reference that the laying of the cable at issue in the main proceedings requires the implementation of complex technical procedures and the use of specialised equipment and specific knowledge, and appears not only inseparable from delivery of the goods in such a wide-ranging transaction but also vital to the later use and exploitation of those goods. It follows that the laying of that cable is not merely an element ancillary to its supply.
...
[36] It is also clear from the decision for reference that if the laying of the cable at issue in the main proceedings is carried out in normal circumstances, the turnover which the supplier will achieve from the transaction is mainly composed of the cost of the cable itself and the rest of the material, which represents 80 to 85% of the total amount thereof, whereas if the conditions are unfavourable, for example because of difficult terrain, the state of the seabed, the need to extend the cable or the occurrence of storms, the proportion of the cost of materials to the total cost decreases." (Aktiebolaget NN C-111/05)
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Not ancillary (independent supplies)​
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- Long distance transport services provided by hotelier having substantial effect on price
"[26] 26 Where, however, a hotelier habitually offers his customers, in addition to accommodation, services which go beyond the tasks traditionally entrusted to hoteliers, and which cannot be carried out without a substantial effect on the package price charged, such as travel to the hotel from distant pick-up points, such services are not to be equated with purely ancillary services." (Madgett and Baldwin C-308/96)
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- Cleaning of common parts which is invoiced separately is separate supply to letting
"[25] Having regard to the whole of the above considerations, the answer to the first question must be that, for the purposes of applying Article 13B(b) of the Sixth Directive, the letting of immovable property and the cleaning service of the common parts of the latter must, in circumstances such as those at issue in the main proceedings, be regarded as independent, mutually divisible operations, so that the said service does not fall within that provision." (RLRE Tellmer Property C-572/07)​
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But see above on Field Fisher Waterhouse
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- Additional supplies by landlord to tenant where tenant had genuine right to choose alternative supplier
"[39] First, if the tenant has the right to choose his suppliers and/or the terms of use of the goods or services at issue, the supplies relating to those goods or services may, in principle, be considered to be separate from the letting. In particular, if the tenant can determine his own consumption of water, electricity or heating, which can be verified by the installation of individual meters and billed according to their consumption, supplies relating to those goods or services may, in principle, be considered to be separate from the letting. As regards services, such as the cleaning of the common parts of a building under joint ownership, such services should be regarded as separate from the letting if they can be organised by each tenant individually or by the tenants collectively and if, in all cases, the supply of those goods and services is itemised separately from the rent on invoices addressed to the tenant.
[40] In this scenario, the mere fact that the non-payment of rental charges allows the landlord to terminate the rental agreement does not prevent the services to which those charges relate from constituting services separate from the letting (see, to that effect, judgment in BGŻ Leasing, C‑224/11, EU:C:2013:15, paragraph 47).
[41] Furthermore, the fact that the tenant has the right to obtain those services from the provider of his choice is also not in itself decisive, since the possibility that elements of a single supply may, in other circumstances, be supplied separately is inherent in the concept of a single composite transaction (judgment in Field Fisher Waterhouse, C‑392/11, EU:C:2012:597, paragraph 26)." (Wojskowa Agencja C-42/14)
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But see possibility that it is a complex supply - C7. Complex supplies
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- Separately metered further supplies by landlord
"[45] Thus, in a case such as that at issue in the main proceedings, which, according to the information provided at the hearing, concerns the letting of a large number of immovable properties intended to be used for various purposes ranging from a hangar to use as housing by a tenant, it is important to ascertain in the context of each letting whether, with respect to utilities, the tenant is free to determine his own levels of consumption. In that regard, the existence of individual meters and billing according to the amount of the goods used is a factor of importance which suggests that the provision of utilities should be regarded as constituting separate supplies from the letting. So far as concerns refuse collection, if the tenant has the choice of supplier or may conclude a contract directly with the supplier, even if, for reasons of convenience, he does not exercise that choice or option, but obtains the service from the supplier designated by the landlord on the basis of a contract concluded between the landlord and the supplier, that circumstance points to the existence of a supply separate to the letting. If, in addition, the amount due for refuse collection and that due under the letting are itemised separately on the invoice, it must be considered that the landlord does not provide a single supply consisting of the letting and that supply." (Wojskowa Agencja C-42/14)
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But see
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"[42] In gaining an understanding of the interrelationship between multiple supplies, the relevant contractual arrangements may be a factor of importance. ( 46 ) For example, the supply of water, heating and electricity should probably be classified as dependent ancillary supplies to the principal supply of ‘letting’, as the recipient of the supplies has an interest in these common supplies only in connection with the transfer of the premises. It is irrelevant whether these ancillary supplies are billed on the basis of consumption, as is normally the case with water and heating. ( 47 ) Non-typical ancillary letting supplies, on the other hand, should probably be characterised as a dependent ancillary supply only in exceptional cases. ( 48 )" (Frenetikexito C-581/19 AG Kokott)
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- Supply of finance/credit not ancillary to supply of car
"[31] There is also a single supply where one or more elements are to be regarded as constituting the principal supply, while other elements are to be regarded, by contrast, as one or more ancillary supplies which share the tax treatment of the principal supply. In particular, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 18 January 2018, Stadion Amsterdam, C‑463/16, EU:C:2018:22, paragraph 23 and the case-law cited).
...
[34] In this case, the referring court takes the view that each car hire purchase agreement consists of several separate supplies, namely, on the one hand, the supply of a vehicle, and, on the other, supplies of credit. In that regard, it must be stated that there is nothing in the order for reference or the observations submitted to the Court to show that that categorisation was not carried out in accordance with the abovementioned criteria." (VWFS C-153/17)
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But see Primback, above.
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- Online glasses dispensing service not ancillary to supply of glasses
"[162] In our view that analysis holds good in this case; the services of the dispensing opticians may be delivered in a different way but the customer will be fully aware of their significant input into the process. Mr Bryant accepted that selling glasses online was a ‘tough nut to crack’ because customers are generally aware of the role of the dispensing optician and regard it as a matter of some comfort. They may therefore be more wary of a process where the role of the dispensing optician is more in the background than is the case on the High Street. However, we have no doubt that those customers who do use the website will have realised that there is significant input by dispensing opticians; this clearly appears from the various prompts to make contact to take advice and the explanatory material that is prepared by or under their supervision. This is against the backdrop of the regulatory background which requires all retail sales to be supervised by a dispensing optician. Therefore from the viewpoint of the typical customer he will see the supply as two distinct and independent supplies." ​​(Prescription Eyewear Limited v. HMRC [2013] UKFTT 357 (TC), Judge Herrington)
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