VAT case embeds new principle

Vendors of products that are zero-rated for VAT cannot apply the same
exemption for associated separate products sold with them which would normally
attract a standard rate of tax, the European Court of Justice (ECJ) has ruled.

The precedent follows a case involving British caravan park owner, Talacre
Beach Caravan Sales Ltd.

It sells fitted caravans at a zero rate of VAT, taking advantage of an
exemption from the European Union’s (EU) sixth VAT directive that allows member
states to retain long-established VAT exemptions for certain social reasons.

Talacre also applied this zero rate to the contents of their caravans, but
Britain’s Customs & Excise Commissioners argued this should only apply to
the vehicle itself.

The case was referred to the ECJ, which has backed the Customs & Excise,
ruling such exemptions should ‘be interpreted strictly’ and that ‘the
application of a separate rate of tax’ would not cause ‘insurmountable

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