Skip to main content

VAT on composite & multiple supplies – Are you applying VAT correctly?

Indirect Tax Matters | September 2023


Taxpayers often make supplies involving goods, services, or a mixture of both, often at a single price as one package. It is crucial to conclude on whether it is considered a composite or multiple supply when determining the VAT treatment.

In most transactions, it will be obvious what the appropriate VAT rate should be for each supply. However, cases can arise where it is not clear. In these instances the below rules, illustrated by examples, are relevant when deciding on the nature of a supply (i.e., whether it is a multiple supply consisting of various individual supplies that are taxable at different VAT rates or a composite supply taxable at a single VAT rate or exempt).

In determining whether a supply is composite or multiple in nature, Section 47 Value-Added Tax Consolidation Act (‘VATCA’) 2010 provides the rules on how a supply involving two or more components, each potentially attracting VAT at different rates, is treated for VAT purposes.

This section was introduced to Irish tax legislation following the Supreme Court case ‘MacCarthaigh (Inspector of Taxes) v Cablelink Limited’, which concerned a TV cable company which indicated that it supplied two distinct services for separate considerations under separate contracts. The two services being provided were as follows:

  • One service consisting of work on immovable goods, being the connection, disconnection, and reconnection of subscribers (liable to VAT at the reduced rate).
  • Another service consisting of the supply of a telecommunications signal, being the TV channels made available to the subscribers on payment of a fee (liable to standard rate VAT).

Revenue challenged the notion that there was a separate supply connection services and then a telecommunication signal and that the standard rate of VAT applied to the entire charge. The Irish Supreme Court upheld the High Court position that two distinct services were supplied in accordance with Irish VAT law.

The court referred to the fact that there was a separate contract, physical work was carried out, and the physical work could be separately costed in terms of labour and materials. In addition, the extent of the connection/reconnection service varied from one customer to another, and the connection/reconnection service could be carried out by an independent company.

The Supreme Court therefore rejected the appeal by Revenue that there was a single service taxable at the standard rate and confirmed the view that there were two distinct services being supplied.

Although the Cablelink case is significant particularly from an Irish perspective, there is a body of EU case-law in this area. Two seminal Court of Justice of the European Union (‘CJEU’) cases worth mentioning are Card Protection Plan Limited (‘CPP’) and Levob Verzekeringen BV (‘Levob’).

In CPP, a UK established company supplied both a card registration service and an insurance service covering the compensation of cardholders against financial loss which occurred in the event of loss or theft of their bank cards and other damages arising on their travels (such as the loss of personal items) under a protection plan. The payment of the compensation was made by a third-party insurer.

The question arose as to whether the provision of insurance was a single supply or a multiple supply when sold with CPP’s other products, and whether the whole service being supplied was either an exempt supply of insurance or a taxable supply of the card registration service involving cancellation of their cards or ordering of a replacement card etc.

CPP argued that the services they were supplying were wholly or mainly VAT exempt insurance services (multiple supply), however, the UK tax authorities believed CPP’s activities were taxable as the primary service they were supplying was a card registration service, which is taxable (composite supply).

Based on the CPP case, the characteristics of composite supplies could be determined by certain tests. As each case is likely to be different, the ECJ left it to the national courts to decide on the appropriate treatments to be applied to supplies where there is doubt over whether they should be considered composite or multiple in nature.

In conclusion to the CPP case, the UK determined that the other features of the scheme being supplied, such as card registration and obtaining replacement cards, were found to be ancillary to the main component of the supply being the indemnity against loss of the bank cards. As such, CPP was deemed to be making a single supply of exempt services.

The second case worth mentioning involved Levob Verzekeringen BV (‘Levob’). This case was a referral from The Netherlands to the ECJ involving a single contract with various elements which were valued and charged for separately.

Levob operated an insurance business and entered a contract with a US company (FDP) to acquire customised software used to market the insurance products to US insurance companies. The contract stipulated that FDP would provide a customisation service for a separate fee to the software itself.

The ECJ considered whether the elements were ‘so closely linked that they formed objectively, from an economic point of view, a whole transaction’. They ultimately determined they were, and ruled there was a single supply being made.

If there is doubt over whether a particular supply is composite or multiple in nature, it is worth looking at the definitions under Section 2 VATCA 2010 which are relevant in understanding the concept of such supplies:

  • Principal supply - The supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.
  • Ancillary supply - A supply, forming part of a composite supply, which is not physically and economically dissociable from a principal supply and is capable of being supplied only in the context of the better enjoyment of that principal supply.
  • Individual supply - A supply of goods or services which is a constituent part of a multiple supply, and which is physically and economically dissociable from the other goods or services forming part of that multiple supply and is capable of being supplied as a good or service in its own right.

Now that the background to the legislation regarding these supplies has been discussed, to best understand the concept of both composite and multiple supplies in practical terms, it is best to explain each separately including everyday examples as an illustration of how each type should be treated from a VAT perspective.

Composite supplies

A composite supply has one principal element known as a ‘principal supply’, with the other elements of that supply being described as an ‘ancillary supply’. These always accompany the principal supply. The main characteristic of an ancillary supply is that it would not make sense from an economic or practical standpoint to supply it without that principal supply. These ancillary components are not physically or economically dissociable from the principal supply. In terms of the VAT treatment of a composite supply, the VAT rate will be the rate applying to the principal element regardless of whether the two elements are separately priced.


The supply of a remote control toy car (23% VAT) with an instruction booklet (0% VAT).

The purpose of the instruction booklet is so that the end customer can better enjoy the remote-control car and is ancillary to the supply of the car. The VAT rate applicable to the principal supply (the car), is 23% and this rate applies to the entire supply regardless of how the consideration is split between the booklet and car by the supplier.

Multiple supplies

The rules governing multiple supplies provide that in such a supply, where elements are capable of being sold separately from each other, each item is taxable at the VAT rate that would apply if they were sold separately.

A multiple supply is made for a single amount of consideration and includes several ‘individual supplies’ of goods or services, with no single item being ‘principal supply’. The fact that a single price is charged for the supplies, this does not prevent the transaction from being treated as a multiple supply. The supplies may or may not be liable to the same VAT rate (this depends on the nature of the goods or services), but each individual VAT liability must be identified and accounted for at the most appropriate VAT rate applicable to each component of the supply.


If a consumer purchases a meal from a takeaway which might include a burger and chips with a soft drink and this meal is sold for one price, the burger and chips, being take-away hot food, are liable to VAT at the reduced rate of VAT (13.5%), whereas the soft drink is liable to the standard rate of VAT (23%).

This meal, and meals that are similar in nature, are taxed as a multiple supply due to the take-away hot food and soft drink elements being physically and economically dissociable from each other (i.e. they are capable of, and often are, sold separately). As a result, the total consideration should be apportioned to reflect the fact that the food element is taxed at the 13.5% rate and the drink element is taxed at the 23% rate.

The provisions outlined above governing composite and multiple supplies also apply to the intra-Community acquisition of goods received from other Member States.


Taxpayers who make supplies consisting of several individual elements for a single consideration should determine the appropriate VAT treatment to ensure VAT is not incorrectly charged.

In doing so, they should consider the application of Section 47 VATCA 2010 to determine whether the supply is considered composite in nature (a supply consisting of a principal and ancillary element on which a single rate of VAT is charged, determined by the rate applying to the principal element) or whether the supply is considered multiple in nature (a supply where multiple rates of VAT are applicable to individual elements of the supply that are physically and economically dissociable from one another).

This article provides a high-level overview of what composite and multiple supplies involve with some simple examples. Most transactions would be more complex and require careful consideration to ensure the correct VAT rate(s) are accounted for on the supplies being made We are happy to discuss how this may impact the specific supplies made by your business.

Did you find this useful?

Thanks for your feedback

If you would like to help improve further, please complete a 3-minute survey