Exemption of Telematics Device Provision and Fitting as Insurance Intermediary Services

1. Introduction

This commentary examines the Court of Appeal’s decision in WTGIL Ltd v Revenue and Customs ([2025] EWCA Civ 399), which addressed the VAT treatment of “black box” or telematics car insurance. Ingenie Limited (ISL) and its group representative WTGIL Ltd challenged HMRC’s refusal to allow recovery of input tax on the purchase and fitting of driving-data recording devices (“Devices”) fitted to policyholders’ cars. The Devices collect acceleration, braking, speed and location data, allowing insurers to adjust premiums and drivers to improve performance. The key issue was whether the supply of providing and fitting these Devices constituted a VAT-exempt service performed “in an intermediary capacity” under Article 135(1)(a) of the Principal VAT Directive (“PVD”) and Item 4, Group 2 of Schedule 9, VATA 1994, or whether it was a separate taxable supply for which input tax could be reclaimed.

Parties:
• Appellant: WTGIL Ltd (representative member, trading as Ingenie).
• HMRC: Respondent, refusing recovery of input VAT.
• Insurers: Covea Insurance plc and others on Ingenie’s underwriting panel.

2. Summary of the Judgment

The Court of Appeal unanimously held that ISL’s services of providing and fitting the telematics Devices are related services performed by an insurance intermediary and are therefore exempt from VAT under Article 135(1)(a) PVD and Item 4, Group 2 of Schedule 9 VATA 1994. In substance:

ISL acted as an insurance broker/agent in all aspects of telematics policy supply, including Device installation.
The Device-related services fell within Note 1(b) (“work preparatory to conclusion of insurance contracts”) or Note 1(c) (“assistance in administration and performance of contracts”) of Item 4.
ISL provided these services “in an intermediary capacity” under Note 2, connecting policyholder and insurer, and was remunerated for them as part of its commission structure.
The appeal was dismissed; input tax on purchase and fitting of Devices remained non-recoverable.

3. Analysis

3.1 Precedents Cited

Secret Hotels2 Ltd v Revenue & Customs [2014] UKSC 16
Emphasized that, for VAT characterization, “regard must be had to all the circumstances” and the entire contractual and economic reality of multi-party arrangements.
Future Health Technologies Ltd v Revenue & Customs (C-86/09)
Confirmed that VAT exemptions are strictly construed but must achieve their intended effect; terms of an exemption cannot be interpreted so narrowly as to nullify it.
EU Principal VAT Directive (2006/112/EC): Articles 2(1) (taxable supplies for consideration), 14 (goods), 24 (services), 135(1)(a) (exemption for insurance-related services), 167–168 (input-tax deduction rules).
Value Added Tax Act 1994, Schedule 9, Group 2, Items 1 & 4, Notes (1) & (2): domestic implementation of Article 135(1)(a).

3.2 Legal Reasoning

The Court’s reasoning proceeded in three steps:

Identify the supply: ISL’s service was the provision and fitting of the Device to a policyholder’s car. It was a supply of services (not goods) distinct from pure data analysis or insurance brokerage.
Determine if for consideration: Consideration need not be monetary; it included the policyholder entering into the insurance contract and the commission paid by insurers (including the £150 Device element).
Apply the exemption:
- Item 4, Group 2 requires four elements:
  - (a) The supplier is an insurance broker/agent (ISL was FCA-authorised).
  - (b) The services are “related” to an insurance transaction (Device fitting is integral to black-box policies).
  - (c) They are services “of an insurance intermediary” (work preparatory—Note 1(b)—and assistance in administration—Note 1(c>).
  - (d) They are provided in the course of acting in an “intermediary capacity” (Note 2)—ISL stood between customer and insurer and was remunerated by both via the premium and commission).
- The Court found each element satisfied: Device fitting was contractually essential to the insurance, performed under broker agreements and policy booklets, and funded by insurer commission.

3.3 Potential Impact

This decision clarifies that technology-based services essential to an insurance product—such as telematics or other policy-monitoring devices—fall within the scope of insurance-related VAT exemptions when supplied by regulated intermediaries. Insurers and intermediaries may:

Treat Device provision and fitting as exempt services, avoiding output VAT charges on premiums for these elements.
Accept that input VAT on Devices and installation services is irrecoverable where genuinely part of an exempt intermediary supply.
Structure agreements and commissions to reflect the integral nature of technology components in modern insurance products.

4. Complex Concepts Simplified

VAT-Exempt Supply: A service or transaction that the VAT Directive or domestic law exempts from VAT; the supplier charges no VAT on the output but generally cannot reclaim related input VAT.
Insurance Intermediary Services (Item 4): Broker/agent services that bring together insurers and insured, prepare or administer insurance contracts, and collect premiums.
Consideration: Anything of value given in exchange for a supply; may be monetary or non-monetary (e.g., the act of entering an insurance contract).
Input VAT Deduction: A business’s right to reclaim VAT it has paid on purchases, but only where the inputs relate to taxable (non-exempt) supplies.
Composite Supply: A single supply made up of multiple elements; the entire composite may be exempt if its principal element is exempt.

5. Conclusion

The Court of Appeal’s judgment establishes that the provision and fitting of black-box telematics Devices, when performed by a regulated insurance intermediary as an integral part of a telematics motor insurance policy, are VAT-exempt under the broad, purposive reading of Article 135(1)(a) PVD and Item 4, Group 2 of Schedule 9 VATA 1994. By focusing on the economic and contractual reality, and respecting the intended reach of the insurance-related exemption, the court reaffirmed that modern insurance products—incorporating sophisticated technology—must be treated as unified, exempt transactions. This decision offers clarity for insurers, brokers and intermediaries on the VAT treatment of device-based services central to policy performance.