Card Protection Plan Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | LORD SLYNN OF HADLEY,LORD JAUNCEY OF TULLICHETTLE,LORD NOLAN,LORD STEYN,LORD HOFFMANN |
| Judgment Date | 31 January 2001 |
| Neutral Citation | [2001] UKHL 4 |
| Court | House of Lords |
| Date | 31 January 2001 |
[2001] UKHL 4
HOUSE OF LORDS
Lord Slynn of Hadley
Lord Jauncey of Tullichettle
Lord Nolan
Lord Steyn
Lord Hoffmann
My Lords,
Dr P R Howell paid to the appellants ("CPP") a fee of £16 for services to be provided to him. The question on this appeal (which affects a large number of CPP's clients) is whether that payment is wholly liable to Value Added Tax (as the Commissioners contend and as the London VAT Tribunal and the Court of Appeal held) or exempt as constituting the making of insurance arrangements for the carrying on of insurance business (as CPP contends), or partly liable since some of the services are and some are not exempt (as Popplewell J held.) The question has to be decided in the light of answers given by the European Court of Justice to questions referred by your Lordships' House pursuant to article 177 (now 234) of the European Community Treaty.
The parties are agreed that the Card Protection Plan operated by CPP is, as found by the Tribunal,
"intended to ensure that a person who has paid the appropriate fee suffers as little financial loss or inconvenience as possible if credit cards or certain other types of property (e.g. car keys, passports, share certificates, insurance policies) belonging to him are stolen or lost".
When a person applies to join the scheme and his application is accepted, he receives a "policy pack" with a registration form, a change of address form, property and telephone stickers, medical emergency warning cards and card change forms, property tags and luggage labels. His name and address and the serial number of credit cards and other property are recorded. He is given a number to ring if he loses any of these documents and CPP passes on any reported loss to the insurer so that steps can be taken to prevent or limit use of the card. The documents he is sent include a statement of "15 important reasons why you should join Card Protection Plan". This statement has been treated as constituting the key document in the case and in view of the question which arises it is necessary to set it out in full.
"1. Confidential Registration of all Cards - accurate computer records will be kept of all your valuable cards
2. £750 Insurance cover - against fraudulent use on any one claim, provided loss notification is received within 24 hours of discovery of loss.
3. Unlimited Protection - you have £750 cover up to the moment of your call to CPP. After that your protection against fraudulent use is unlimited.
4. Immediate Loss Notification - free 24 hour ACTIONLINE to receive your loss reports and act immediately to protect you. ACTIONLINE stickers provided for your phone, diary or wallet, so our vital ACTIONLINE number is always at hand.
5. Replacement cards - can be ordered when losses are notified, thus minimising your inconvenience.
6. Change of Address Service - all card insurers can be notified before you move to ensure your cards don't get into the wrong hands.
7. Lost key Location - key tags with your unique policy number and our FREEPOST address help ensure keys can quickly be returned to you in confidence, when found.
8. Valuable Property & Document Protection - register serial numbers of your property and details of policies, shares, passports, etc. for your own security and to assist in notifying police or making insurance claims in the event of loss or theft. Through our insurance cover you can claim up to £25 on communications costs when assisting police or claiming against personal insurance in respect of items registered with CPP. Includes phone calls, correspondence, postage, etc. but not travel costs.
9. £500 Emergency Cash - rushed anywhere in the world (upon approval) if you are stranded and have lost your cards. An interest free advance repayment within 14 days.
10. Lost Luggage Recovery - with CPP stickers lost luggage and other personal property such as briefcase or handbag can be quickly identified and owners advised of its location. Our special insurance cover entitles you to claim up to £25 on communications costs incurred arranging recovery of keys or luggage protected by CPP tags and stickers. This includes phone calls, correspondence, postage, etc., but not travel costs.
11. Emergency Medical Cover Worldwide - in the event of illness or an accident abroad you need professional help, fast. We provide 24 hour emergency cover and one phone call secures medical advice and assistance in English and other languages, anywhere in the world. If necessary, at your expense, a full consultation, and even medical repatriation by air - with all necessary specialist personnel - can be arranged for you.
12. Emergency Airline Ticket - if your credit cards and cash are lost or stolen and you're stranded overseas, CPP's travel cover means arrangements can be made, upon approval, to issue an air ticket to get you home. Cost repayable within 14 days.
13. Computer Update Services - confidential printout of your card details for you to check, annually.
14. Medical Emergency/Warning Card - dual purpose - to warn that all your cards are protected, and also to provide medical information that can save vital seconds in an emergency. Carry with you at all times.
15. Car Hire Discounts - you can claim valuable discounts on car rental from Hertz, Avis and Europcar worldwide."
To cover claims made by its clients CPP instructed an insurance broker to arrange a policy of insurance. Such a policy was taken out for periods of a year and at the relevant time was with the Continental Insurance Co of London Plc ("Continental") and covered the period from 1 September 1989 to 31 August 1990. The insurers guaranteed to indemnify the insured against loss as more fully set out in the policy detailed in the schedule to the policy. The schedule provided that the assured were "various individual members of Card Protection Plan as per schedule". Sections A to F of the interest specified in the policy covered liability of the cardholder in respect of direct financial loss arising from the wrongful use of any lost or stolen cards, the costs of reuniting CPP's clients with their luggage, the costs of assisting the police and/or making insurance claims against individual members' insurances and the costs of providing medical assistance and emergency cash and airline tickets. It is to be seen that these cover the heads of claim to which the client was entitled under the 15 reasons.
By letter dated 28 October 1983 the Commissioners accepted that the benefits supplied by CPP to its customers was an exempt supply, but by letter dated 23 February 1990 the Commissioners decided that the supply to Dr. Howell of the services provided in the agreement was fully taxable at the standard rate of VAT firstly because the package of services was essentially to maintain a register of card numbers, to provide a notification loss service and to prevent liability from unauthorised use and secondly because there was no supply of insurance by Continental to the client and no privity of contract between Continental and the client.
The relevant legislation
The Value Added Tax Act 1983 was enacted to give effect to Council Directive (77/388/EEC) (OJ 1977 L145, p 1) ("the Sixth Directive").
VAT is payable on the supply of services made in the United Kingdom where it is "a taxable supply made by a taxable person in the course or furtherance of any business carried on by him," other than an exempt supply: section 2(1) and section 2(2) of the 1983 Act.
Article 13(B) of the Sixth Directive provides that
"Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of insuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse; (a) Insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;…"
Pursuant to that obligation section 17(1) of the 1983 Act provided that "A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 6 to this Act…". At the time of the Commissioners' decision (23 February 1990) Schedule 6 included:
"Group 2 - Insurance
Item No.
1. The provision of insurance and reinsurance by - (a) a person permitted, in accordance with section 2 of the Insurance Companies Act 1982, to carry on insurance business;…
3. The making of arrangements for the provision of any insurance or reinsurance in items 1 and 2.
4. The handling of insurance claims by insurance brokers, insurance agents and persons permitted to carry on insurance business as described in item 1."
With effect from 1 December 1990 item 1 was amended (by article 2 of The Value Added Tax (Insurance) Order 1990 (SI 1990 No 2037)) but not in a way relevant to the present appeal.
The First Council Directive on the coordination of laws relating to the business of direct insurance other than life insurance (Council Directive (73/239/EEC) (OJ 1973 L228, p 3), as amended by Council Directive (84/641/EEC) (OJ 1984 L339, p 21) defines the classes of business to which the Directive applies. It included (annex, point A(18)):
"18. Assistance
Assistance for persons who get into difficulties while travelling, while away from home or while away from their permanent residence".
The litigation so far
On CPP's challenge to the Commissioners' decision, the Tribunal, in reasons given by Judge Medd QC, concluded from a review of the 15 reasons that CPP undertook
"first and foremost, to register on its computer the number and type of all his credit cards and also the serial numbers of his other valuable property and documents...
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