50. Provisions in relation to certain supplies

Summary

This section provides for 3 cases where special rules apply in relation to tax rates. These cover goods that are made up by a manufacturer, the processing of food and drink and the letting of plant and machinery.

Details

(1) If a person supplies materials to a manufacturer for the purpose of having goods made for him/her and the rate of tax on the manufactured goods is higher than the rate on the materials, the manufacturer, in addition to his/her normal liability on the charge for the manufacture of the goods, is accountable for tax on the value of the materials supplied to him/her. The rate used is the difference between the two rates involved - this is in effect a supplementary charge.

(2) Subsection (2) is an anti-avoidance provision designed to ensure that the tax chargeable on a catering service cannot be avoided, or substantially reduced, by a scheme under which the zero-rated food would be supplied by a person other than the caterer. It provides that where a person to whom a catering service is supplied arranges for zero-rated food to be supplied to the caterer, then, the caterer, in addition to the normal liability on the catering charge, is accountable for tax at the 13.5% rate on the value of that zero-rated food supplied and used in the course of providing that service.

In the absence of a provision of this type, two associated companies could enter into an arrangement under which one of them would sell the zero-rated food to the customer and the other would charge the customer separately for preparing and serving the food. In those circumstances, tax would be suffered only in the catering charge and the companies would enjoy an unfair advantage over competitors making a single charge for the supply of meals.

(3) The hire of goods or machinery, which have been installed in a premises in such a way that they form part of the premises, is not charged at the same rate as the short-term letting of immovable property which is exempt, or as the supply of immovable goods which is liable at 13.5%, but is charged at the rate applicable to the hiring of those goods or machinery in normal circumstances (i.e. if the goods or machinery were movable).

Relevant Date: Finance Act 2019