WTGIL Ltd v Revenue and Customs

Factual and Procedural Background

This case concerns the correct VAT treatment of a specialised motor insurance product aimed at young drivers aged 17 to 25, which requires fitting an electronic device ("the Device") to the insured car. The Device records driving data used to adjust insurance premiums and assist drivers in improving their driving. The appellant, Company A (formerly Ingenie Limited), and Company B (formerly Ingenie Services Limited) are part of a VAT group. Company B supplied and fitted the Devices during VAT periods 07/14 to 07/18. The supplies were deemed made by Company A as the VAT representative member.

Company B acted as an insurance intermediary, arranging telematics insurance policies underwritten by insurers including Company C (formerly Covea Insurance plc). Company B provided and fitted the Device, collected and analysed telematics data, and reported to insurers and policyholders. Initially, Company B treated the supplies as exempt insurance intermediary services under the VAT Directive and domestic legislation, thus unable to reclaim input tax on Devices and fitting costs.

In 2018, Company A submitted an Error Correction Notice claiming recovery of input tax on the Devices and fitting, arguing these were taxable supplies of goods or services to policyholders. HM Revenue & Customs ("HMRC") rejected the claim, contending the supplies were exempt insurance intermediary services with consideration being commission paid by insurers. Company A appealed to the First-tier Tribunal ("FTT"), which dismissed the appeal, finding no taxable supply to policyholders for consideration. Company A then appealed to the Upper Tribunal ("UT"), which upheld the FTT decision, rejecting Company A's arguments about taxable supplies and deemed supplies.

Company A obtained permission to appeal to this court. The appeal focuses on whether the provision and fitting of the Device by Company B to policyholders constitute taxable supplies of services for consideration or exempt insurance intermediary services.

Legal Issues Presented

1. Whether the supply by Company B to policyholders of the provision and fitting of the Device constitutes a taxable supply of services for consideration under the Principal VAT Directive and domestic law.
2. Whether such supplies fall within the exemption for insurance intermediary services under Item 4 of Group 2, Schedule 9 of the Value Added Tax Act 1994 ("VATA 1994").
3. Whether the consideration for the supply can be non-monetary (i.e., the policyholder entering into the insurance contract) or must be monetary.
4. Whether the supplies include the use of data collected by the Device.
5. Whether, alternatively, there is a deemed supply of goods when the Device is transferred or disposed of.

Arguments of the Parties

Appellant's Arguments

• Company A contended that the input tax on the cost of purchasing and fitting the Devices was recoverable because the supplies to policyholders were taxable supplies of services for consideration.
• The supplies consisted of (a) initial provision and fitting of the Device in return for non-monetary consideration (policyholder entering into insurance contract) or monetary consideration (commission from insurer); (b) subsequent provision and fitting on vehicle changes for monetary consideration charged to policyholders; and (c) if no consideration, a deemed supply of goods.
• Company A argued that the supply to policyholders was separate and distinct from exempt insurance intermediary services supplied to insurers.
• Company A maintained that the supply was a supply of services, not goods, and did not include the use of data collected by the Device.
• Company A disputed the Upper Tribunal’s conclusion that Company B was not acting "in an intermediary capacity" when providing and fitting the Device to policyholders.

Respondent's Arguments (HMRC)

• HMRC argued that Company B made a single indivisible exempt supply of insurance intermediary services, with consideration being commission paid by insurers, and thus no taxable supply to policyholders.
• HMRC contended the provision and fitting of the Device was integral to exempt insurance intermediary services and supplied in an intermediary capacity to insurers and policyholders.
• HMRC submitted that the supply to policyholders was exempt under Item 4 of Group 2, Schedule 9 VATA 1994, as services related to insurance contracts provided by an insurance intermediary acting in an intermediary capacity.
• HMRC argued that the non-monetary consideration identified by Company A (policyholder entering into the insurance contract) was capable of being expressed in monetary terms.
• HMRC agreed that the supply was a supply of services consisting of provision and fitting of the Device, excluding data collection and analysis services.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by analysing whether the provision and fitting of the Device by Company B to policyholders constituted exempt insurance intermediary services under Item 4 of Group 2, Schedule 9 VATA 1994. It noted that Company B was an insurance intermediary authorised to arrange telematics insurance policies underwritten by insurers, including Company C, and that the Device was an integral and indispensable part of the insurance product.

The court rejected the Upper Tribunal’s conclusion that Company B was not acting "in an intermediary capacity" when supplying the Device. It found that Company B's role was to act as an intermediary between insurers and policyholders, both before and after the insurance contract, and the provision and fitting of the Device was part of its intermediary activities.

The court emphasised the importance of considering the entire contractual and commercial context, as established in Secret Hotels2 and Aimia Coalition Loyalty, and found that the Device supply was related to and essential for the insurance contract and thus fell within the exemption for insurance intermediary services.

The court addressed the argument about non-monetary consideration, noting that the supply was made in return for consideration capable of being expressed in monetary terms, including commission paid by insurers funded by policyholders' premiums.

The court also clarified that the supply was a supply of services, not goods, and did not include the use or analysis of data collected by the Device, which was outside the scope of the appeal.

Applying the relevant provisions of the Principal VAT Directive and VATA 1994, the court concluded that the disputed supplies were exempt from VAT as services of an insurance intermediary acting in an intermediary capacity related to insurance transactions.

Holding and Implications

The court’s final decision is DISMISSED the appeal brought by Company A.

The court held that the supplies by Company B of providing and fitting the Devices to policyholders are exempt insurance intermediary services under Item 4 of Group 2, Schedule 9 VATA 1994, as they are supplied in an intermediary capacity related to insurance transactions. Consequently, Company A is not entitled to recover input tax on the Devices and fitting costs.

The direct effect is that the appellant’s claim for input tax recovery is denied. No new precedent was set beyond the application of established principles concerning VAT exemptions for insurance intermediary services and the proper characterisation of supplies within complex insurance arrangements.