Safestore Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 26 April 2019 |
| Neutral Citation | [2019] UKFTT 276 (TC) |
| Date | 26 April 2019 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 276 (TC)
Judge Guy Brannan
Roderick Cordara QC and Robert Purves, instructed by Roly Pipe and Partners appeared for the appellant
Hui Ling McCarthy QC, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondent
Value added tax – Insurance for self storage customers – Whether supplies of insurance or of insurance intermediary services within VATA 1994, Sch. 9, Grp. 2, items 1 or 4 – ECJ decision in Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] BVC 155 considered – Whether assessment dated 30 October 2014 was out of time – Whether within the scope of VAT Input Tax (Specified Supplies) Order 1992/3121, art. 3(a) and/or (c) – Whether supplies made to the person who belongs outside the member states – Appeal dismissed in principle.
The FTT considered whether a self storage company which required customers to take out insurance cover for the goods stored was making supplies of insurance to those customers or was making supplies of insurance intermediary services to the captive insurer which supplied the cover.
Safestore provides self storage facilities for business and domestic customers. This appeal concerned the company's input tax claims for the period ending 30 September 2012. Until this date the company's supplies of storage were exempt from VAT, after this date they became taxable due to a change in the law.
Safestore required its customers to purchase insurance cover for their goods at the time their storage contract commenced. Business customers were able to provide their own insurance but domestic customers had to purchase a specific policy. The policy was provided by Assay, a captive insurer owned by the Safestore group. Customers purchased the policy via Safestore, paying the premium with the fees for storage. Safestore remitted the premiums to Assay on a quarterly basis, retaining 30% of the premium as its “commission”.
Safestore argued that it was not supplying insurance to its customers, it was arranging a contract for insurance between its customers and Assay for which it received a commission for supplying an insurance intermediary service. Because Assay was established in Guernsey it was a non-EU customer and Safestore was therefore making specified supplies and was entitled to recover input tax incurred on its costs.
HMRC argued that Safestore was supplying insurance to its customers, i.e it was making a VAT exempt supply to UK consumers and, therefore, it could not make a claim to recover its input tax.
The FTT analysed the paperwork completed by the customer and the documents provided to the customer, in addition it reviewed the paperwork between Safestore and Assay and, also, Assay and Royal & Sun Alliance as Assay reinsured the risk with this company. The FTT also heard detailed argument from both sides on the definition of insurance, the workings of the insurance market and the implications of the ECJ Decision in Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] BVC 155 (“CPP”). CPP is the lead authority in this area and concerned a company which offered a package of goods and services to customers to protect them from loss and inconvenience if they lost their credit cards. CPP was found to be supplying insurance under a block policy to its customers.
The FTT concluded that it was not possible to distinguish the facts in Safestore from the facts in CPP in a meaningful way and, following CPP principles, concluded that Safestore was supplying insurance to its domestic customers.
The appeal concerned two VAT amounts. First VAT, for which Safestore had made a claim and, second, a smaller amount for which HMRC had issued an assessment. In case it lost on its first argument, Safestore also argued that the assessment was issued out of time because it had been made more than “one year after evidence of the facts, sufficient in the opinion of the Commissioners to justify making the assessment comes to their knowledge” (VATA 1994, s. 73(6)(b)).
The FTT concluded that the assessment issued by HMRC was not time-barred. The correspondence between the parties was long-running and the assessment was issued shortly after Safestore provided a Consumer Goods Policy document that HMRC had not received before. Although Safestore argued that HMRC had sufficient information to issue an assessment at a much earlier stage in the correspondence, the FTT agreed with HMRC that the Consumer Goods Policy document was the “missing piece in the puzzle” that enabled them to conclude than an assessment should be issued.
Safestore's appeal was dismissed on both grounds.
The decision contains an in-depth and illuminating analysis of how supplies of insurance are identified and defined in cases where an intermediary between the insurer and the insured sells the policy along with other goods and services.
Considering the time-bar issue, as HMRC could clearly demonstrate that they had received additional information when the Consumer Goods Policy document was provided and that document was quoted from extensively in the decision, the FTT reached the predictable conclusion that it was reasonable for HMRC to decide to assess only after they had received it.
As there is a considerable amount of VAT at stake (>£800,000) an appeal to the UT may be expected.
[1] This is a consolidated appeal by Safestore Limited (“Safestore”) against two VAT decisions of the respondents (“HMRC”):
- The first disputed decision (the First Decision) is HMRC's refusal of 9 December 2013 of Safestore's claim for repayment of £793,830 of under-claimed input tax.
- The second disputed decision (the Assessment) is HMRC's assessment of 30 October 2015 to recover £72,615.35 of over-declared input tax.
[2] At the hearing Safestore accepted that a further supplementary claim which it made on 13 August 2015 relating to VAT periods 01/13 to 04/14 was not in fact before the Tribunal.
[3] The appeal concerns four main issues:
- whether Safestore was supplying insurance to its UK-based customers11At the hearing the parties used the term customer to refer to the individual domestic (i.e. non-business) customer who stores his/her goods with Safestore and takes out insurance thereon and I shall do the same in this decision. (item 1 supplies22A reference to item 1 Group 2 Schedule 9 VATA.); or
- insurance intermediary services (item 4 supplies33A reference to item 4 Group 2 Schedule 9 VATA.) to Assay Insurance Services Limited (Assay), a Guernsey-resident insurance captive which is a wholly owned subsidiary of Safestore Holdings Plc (Safestore Holdings), the common ultimate parent company of Assay and Safestore; and
- the place of those supplies. If Safestore is supplying insurance intermediary services to Assay, is the place of those supplies Guernsey (i.e. to Assay's business establishment) or the UK (i.e. to a fixed establishment of Assay in the UK); and
- was the Assessment made out of time for the purposes of section 73(6)(b) Value Added Tax Act 1994 (VATA) (the time-bar issue)?
[4] Issues (1) and (2) above are alternatives. If Safestore was making item 1 supplies, then it would not also be making item 4 supplies and issue (3) above would not arise. In that event, issue (4) above would become relevant. Conversely, if Safestore was not making item 1 supplies but was making item 4 supplies and issue (3), but not issue (4) above (see the next paragraph), would have to be decided.
[5] During the hearing, Miss McCarthy QC, appearing for HMRC, informed me that the Assessment related entirely to VAT that would have been due if Safestore was making item 1 supplies.
[6] It was common ground that in order for Safestore's appeal on the First Decision to succeed, it needs to establish that Safestore was making supplies of insurance intermediary services to Assay (and not supplies of insurance to its customers) and that Assay had no fixed establishment(s) in the UK at which Safestore's supplies were being received.
[7] HMRC's position is that Safestore was either making supplies of insurance to its customers (item 1 supplies) or it was making supplies of insurance intermediary services (item 4 supplies) to a fixed establishment(s) of Assay in the UK. Accordingly, Safestore would be unable to deduct input tax attributable to these supplies. HMRC further maintains in relation to the Assessment that it is not time-barred.
[8] The relevant period for the purposes of this appeal is from 30 April 2009 to 30 September 2012 (“the Relevant Period”).
[9] The parties have asked me for a decision in principle on the above issues, with any adjustment to the figures consequent upon my decision being made subsequently.
[10] I was provided with four lever arch files of documents. In addition, Mr Stuart Beavers, Safestore's Head of Retail Services, produced to witness statements and gave oral evidence on which he was cross-examined.
[11] In addition, Mr David Kendall, of Cooley (UK) LLP, a solicitor specialising in insurance law, supplied a witness statement on behalf HMRC in relation to insurance regulatory issues. Mr Kendall was not called to give oral evidence nor was he required for cross-examination.
[12] I should say that, in relation to Mr Kendall's witness statement, Mr Kendall was presented as an expert witness on behalf of HMRC. Most of his witness statement, however, comprised of an analysis of the legal relationship between the parties and statements in relation to the law concerning insurance regulation. I have treated these parts of his statement as submissions because they were clearly not admissible evidence. There were some parts of his evidence which concerned market practice and insurance terminology which I did, however, regard as admissible evidence.
[13] Safestore did not put forward an expert witness in relation to insurance regulatory matters. Mr Purves, appearing with Mr...
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