VAT ancillary supply principle: delivery of motor cars treated as part of the main supply, blocking input tax recovery.

For VAT purposes, a delivered-product arrangement must be assessed as a whole in commercial reality, and a separately identified transport charge does not by itself create a distinct supply of services. Where the delivery element is merely incidental or ancillary to the principal supply of goods, the transaction is treated as a single supply of the cars. On that basis, the transport and delivery element followed the VAT treatment of the car sale, and input tax charged on the delivery component was not deductible under the blocking rules.

---

---

Issues: Whether the transport and delivery of motor cars supplied by the manufacturer formed a separate supply of services or were merely incidental or ancillary to the supply of the cars for VAT purposes, and whether input tax charged on the delivery element was deductible.

Analysis: The proper approach was to look at the transaction as a whole and to identify its essential features in commercial reality. The fact that delivery charges were separately identified in some contracts or invoices, or that delivery could theoretically have been arranged independently, did not determine the VAT character of the transaction. The Sixth VAT Directive treated incidental expenses such as transport as part of the taxable amount, but that provision was directed to valuation and did not itself identify supplies. On the facts, each transaction was a purchase of a delivered car, with property and risk passing on delivery, and the transport element was a means of better enjoying the principal supply rather than an aim in itself.

Conclusion: The delivery services were ancillary to the supply of the motor cars and did not constitute a separate supply for VAT purposes. The input tax on the delivery element was not deductible under the blocking provisions.

Final Conclusion: The appeal succeeded and the taxpayer was not entitled to recover the VAT charged on transport and delivery costs as input tax.

Ratio Decidendi: Where goods are supplied under a contract for a delivered product, and the delivery element is ancillary in commercial reality to the principal supply, the transaction is treated as a single supply for VAT purposes and the associated input tax follows the tax treatment of that principal supply.

---