Unbundling Modern Day Tax Avoidance: Homeserve Membership Ltd v Revenue and Customs [2009] EWHC 1311 (Ch)
| Author | Clive Bow |
| Position | LLB (Hons) (Soton), ACA, ACII, CISA, PGDip (LPC) |
| Pages | 45-48 |
[2020]
Vol.10
45
Unbundling Modern Day Tax Avoidance: Homeserve Membership Ltd v
Revenue and Customs [2009] EWHC 1311 (Ch)
Clive Bow*
Abstract
This article explores the impact of the Homeserve decision on the application of indirect taxes on fees charged for
additional services by insurance intermediaries. Following the restrictive measures introduced after this case by
HMRC, the curre nt scope of the separate contracts rule will be analysed. The intention of this article will be to
conclude whether the legacy of this decision contributes to an unfair tax regime, which is the focal point of a 2019
consultation launched by HMRC.
Background
here is a general rule that services provided by UK insurers will attract indirect tax,
which is collected from policyholders by insurers. Raising insurance fees through the
collection of tax may deter some customers from entering into new policies, and this
is considered by some insurers to be detrimental to the overall market. In response to this, legal
advisors have developed cunning ways to avoid these taxes altogether, resulting in HMRC
launching a consultation in 2019 to better understand modern-day practices that result in unfair
Insurance Premium Tax (“IPT”) outcomes.
1
IPT was introduced by the Finance Act (the “Act”) in 1994 and is an indirect tax on general
insurance premiums.
2
HMRC have issued a prescribed list of contract types that are deemed
worthy of exemption, for example, policies relating to the Channel Tunnel.
3
There is also a
statutorily enshrined exemption, which is to be referred to hereon as the separate contracts
rule,
4
which forms the focal point of the Homeserve
5
decision. It is the intention of this essay
to review this landmark case, and its aftermath, to conclude on whether this has contributed to
an unfair tax regime.
* LLB (Hons) (Soton), ACA, ACII, CISA, PGDip (LPC)
1
‘Call for Evidence: The Operation of Insurance Premium Tax’ (3 June 2019)
<https://www.gov.uk/government/consultations/call-for-evidence-the-operation-of-insurance-premium-tax>
accessed 20 May 2020.
2
Depending on the class of insurance, the tax rate applicable is either 12% or 20%.
3
‘Notice IPT1: Insurance Premium Tax’ (6 March 2019) <https://www.gov.uk/government/publications/notice-
ipt-1-insurance-premium-tax/notice-ipt1-insurance-premium-tax> 2.3 Exempt insurance contracts, accessed 19
May 2020.
4
Finance Act 1994, s 72.
5
Homeserve Membership Ltd v Revenue and Customs [2009] EWHC 1331 (Ch).
T
To continue reading
Request your trial