Countrywide Insurance Marketing Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 November 1993 |
| Date | 18 November 1993 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Barclays Bank plc (No. 3) VAT(LON/90/1361) No. 6469; [1991] BVC 893
Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53
Beheermaatschappij Van Ginkel Waddinxveen BV, Reis-en Passagebureau Van Ginkel BV v Inspecteur der Omzetbelasting, Utrecht (Case C-163/91) 12 November 1992
Dogbreeders Associates VAT(LON/89/313) No. 4295; (1989) 4 BVC 777
Donald Ford (Financial Services) VAT(EDN/86/99 and 110) No. 2432; (1987) 3 BVC 609
Hamann v Finanzamt Hamburg-Eimsbüttel VAT(Case 51/88) (1990) 5 BVC 32
Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) (Case 152/84) [1986] ECR 723
Minster Associates VAT(LON/85/326) No. 4580; (1990) 5 BVC 1315
National Smokeless Fuels Ltd v IR Commrs TAX[1986] BTC 232
Newmir plc VAT(LON/92/900) No. 10,102; [1993] BVC 961
Skatteministeriet v Henriksen VAT(Case 173/88) (1990) 5 BVC 140
Verbond van Nederlandse Ondernemingen v Inspecteur der Invoerrechten en Accijnzen (Case 51/76) [1977] ECR 113
Wright Manley Ltd VAT(MAN/92/466) No. 10,295; [1993] BVC 1595
Exempt supplies - Insurance - Group of insurance intermediaries negotiating with insurers and making policies available to members - Whether services amounted to making of arrangements for provision of insurance - Value Added Tax Act 1983, Sch. 6, Grp. 2, item 3; Directive 77/388, the sixth VAT directive,eu-directive 77/388 article 13(B)art. 13(B)(a).
The issue was whether services provided by the appellant in connection with personal lines of insurance amounted to the making of arrangements for the provision of any insurance and therefore exempt.
The appellant was formed to enable members, who were independent insurance brokers and intermediaries in all parts of the UK, to exercise their bulk-buying power and to compete with banks, building societies which were providing insurance services to the public.
The company employed product-development staff who explored opportunities to modify and improve existing products and introduce new ones. In addition, the appellant entered into negotiations with the insurers who underwrote its products to secure advantageous policies for its members. Standard brochures, proposal forms and policy documentation were used by members and they used computer hardware and software provided by a company associated with the appellant.
The appellant's income came from membership and introductory fees paid by members and commission paid by the insurers. It was agreed that the first two items were standard-rated but the status of the last was disputed.
The appellant contended that its services were exempt within the provisions of domestic legislation as being "the making of arrangements for the provision of any insurance" (Value Added Tax Act 1983, Sch. 6, Grp. 2, item 3) and under eu-directive 77/388 article 13(B)art. 13(B)(a) of Directive 77/388, the sixth VAT directive, as "insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents".
The commissioners contended that to obtain exemption, the activities had to be related to the provision of specific insurance contracts or policies. The appellant was at one remove being, in effect, a marketing organisation whose activities were ancillary rather than integral to the provision of insurance. They further contended thateu-directive 77/388 article 13(B)art. 13(B)(a) of the sixth directive required that Value Added Tax Act 1983, Sch. 6, Grp. 2, item 3 be read as though the services had to be "something that a broker might do".
Held, allowing the company's appeal:
1. It was not necessary to be able to relate the appellant's activities to a specific insured person. Its activities in devising insurance products, conducting negotiations with insurers and making products available for sale by its members were sufficient to establish a nexus with the provision of insurance. They were a necessary part of the chain of supply whereby policies were provided by the insurer to the insured and as such were not ancillary to the supply but an integral part of it.
2. The commissioners were not entitled to rely on the wording of art. 13(B)(a) of the sixth directive since it was settled law that the provision of a directive may not be relied upon against an individual. In any event, the appellant's activities were sufficiently similar to insurance broking and agency.
3. Using the purposive test of construction, the aim of the Directive was to exempt the provision of insurance services and the appellant performed such services "as an insurance agent".
[The tribunal set out the facts summarised above and continued as follows.]
On behalf of the appellant company, Mr Walters submitted that the services of the appellant company were exempt as being "the making of arrangements for the provision of any insurance" within item 3, Grp. 2, Sch. 6 [to the] Value Added Tax Act 1983 and as being "services related to insurance transactions performed by insurance brokers and insurance agents" within eu-directive 77/388 article 13(B)art. 13(B)(a) of Directive 77/388, the sixth VAT directive, which had direct effect. He also submitted that the services of the appellant company constituted single and not multiple supplies but as this was accepted by Mr Newey [for the commissioners] we do not refer to it further in this decision.
On behalf of the commissioners, Mr Newey submitted that the services of the appellant company were not exempt under the provisions of item 3 of Grp. 2 [of Sch. 6 to the Value Added Tax Act 1983] and did not come within the provisions of eu-directive 77/388 article 13(B)art. 13(B)(a) of the sixth directive which, in any event, did not have direct effect.
The submissions of the parties raised six distinct questions, the first three relating to the UK legislation and the last three relating to the sixth directive. We have found it convenient to consider the submissions of the parties within the context of these six questions which are:
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(2) Does the wording of item 3 of Grp. 2 mean that activities are only exempt if the taxpayer negotiates a specific insurance contract or policy with the insured?
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(3) In considering whether services come within item 3 of Grp. 2, should a distinction be drawn between services which are integral to the provision of the insurance itself and services which are external to it?
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(4) To come within item 3 of Grp. 2 must the activities be similar to insurance broking and "something that a broker might do"?
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(5) Are the services supplied by the appellant company "services related to insurance transactions" within the meaning of eu-directive 77/388 article 13(B)art. 13(B)(a)?
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(6) Does the appellant company perform services related to insurance transactions "as an insurance agent" within the meaning ofeu-directive 77/388 article 13(B)art. 13(B)(a)?
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(7) Are the provisions of eu-directive 77/388 article 13(B)art. 13(B)(a) of the sixth directive of direct effect?
We start, therefore, with the first question, namely, does the wording of item 3 of Grp. 2 [of Sch. 6 to the Value Added Tax Act1983] mean that activities are only exempt if the taxpayer negotiates a specific insurance contract or policy with the insured?
On behalf of the appellant company Mr Walters submitted that the wording of item 3 of Grp. 2 did not require the services to be related to a specific policy supplied to a specific insured person. Certain dicta in the tribunal decision in Dogbreeders Associates VAT(LON/89/313) No. 4295; (1989) 4 BVC 777 which might lead to that conclusion had been clarified by the tribunal decision in Barclays Bank plc (No. 3)VAT(LON/90/1361) No. 6469; [1991] BVC 893. In any event, having regard to the fact that the appellant company was remunerated by commission related to each policy actually effected; having regard to the appellant company's input to "Countrywide" products; and having regard to the fact that the appellant company provided the rating information for all policies; there was a clear nexus between the activities of the appellant company and each "Countrywide" policy which was effected. Although the appellant company had few direct pre-contract dealings with customers requiring insurance, that was because the nature of the risks insured and the development of computer technology meant that individual negotiation with insurers on each proposal was no longer necessary. Even though the appellant company was not involved with the negotiation of each individual premium that was because the rate of premium had been negotiated in advance. The commissioners accepted that renewal commissions were exempt and, on a renewal, there might be no direct dealing between a broker or agent receiving the commission and the specific insured person.
On behalf of the commissioners Mr Newey submitted that the exemption in Grp. 2, item 3 was for "the making of arrangements for the provision ofany insurance" and that the use of the word "any" meant that the activities had to be related to the provision of specific insurance contracts or policies. The facts and evidence showed that the appellant company was, in effect, a marketing organisation which did not make arrangements for the provision of any specific policy. The appellant company remained at one remove from the arrangement of any specific policy. The actual arrangements were made by the "Countrywide" member. It was not sufficient that the activities could lead to specific contracts or policies. He cited the tribunal decision inDogbreeders as authority for that view. He submitted that the tribunal decision in Barclays Bank plc (No. 3) (which was under appeal) did not depart from that view. He further submitted that the provisions of eu-directive 77/388 article 13(B)art. 13(B)(a) required a relationship to a specific transaction.
In Dogbreeders the...
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