WTGIL Ltd v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 26 March 2024 |
| Neutral Citation | [2024] UKUT 77 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2024] UKUT 77 (TCC)
Mr Justice Adam Johnson, Judge Thomas Scott
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Supply and fitting of black box device as condition of insurance policy – Whether a supply of goods or services to policyholders for consideration – No – Whether a deemed supply of goods to policyholders – No – Appeal dismissed – Council Directive (Principal VAT Directive) 2006/112/EC, art. 2 and art. 14.
In WTGIL Ltd v R & C Commrs [2024] BVC 504, the Upper Tribunal (UT) upheld the decision of the First-tier Tribunal (FTT) in WTGIL Ltd finding there was no supply of goods or services from the taxpayer to policyholders obliged to have black box devices fitted to their cars as a condition of their insurance policies. The VAT incurred on the cost of the devices was attributable to the exempt supply of intermediary services provided to the insurers and was, therefore, not recoverable as input tax.
The taxpayer, previously known as Ingenie Ltd, was the representative member of a VAT group that included Ingenie Services Ltd (ISL). ISL developed, marketed and sold black box insurance, primarily to young or inexperienced drivers.
It was a condition of the insurance that a telematics, or black box, device was fitted to the policyholder’s car. ISL agreed to fit the device or arrange for it to be fitted. They then collected the data from the device and provided an analysis of the driving behaviour to both the insurer and the policyholder. They were not, however, the insurers. The policies were underwritten by insurers from a panel appointed by ISL who paid ISL a commission.
ISL considered they were making a taxable supply to policyholders when they provided and fitted the devices to their cars. They submitted a claim, to HMRC, for recovery of the VAT incurred on related costs which they said was input tax attributable to those taxable supplies. HMRC rejected the claim arguing that the only service provided by ISL was an exempt supply of insurance intermediary services which they provided to the insurers. The VAT was not, therefore, recoverable. The FTT dismissed their subsequent appeal, and found there was no supply of goods or services to the policyholders, and no deemed supply of the devices. ISL claimed the FTT had made several errors of law, wrongly construing the contractual obligations of the relevant parties. Alternatively they had incorrectly analysed the case law authorities and erred in concluding there was not a deemed single supply of the device. The UT had to decide:
- whether, for VAT purposes, ISL made a supply to policyholders for consideration; or
- whether, for VAT purposes, there was a deemed supply of the device to policyholders.
ISL contended there was either a supply for non-monetary consideration, being their entry into the insurance contract and agreement to the installation of the device and consequential data collection or, a supply for the monetary consideration paid to ISL by the insurer “out of the premium”.
The UT agreed with the FTT there was no supply of goods to policyholders when the device was installed because there was no transfer of the right to dispose of the property as required by EC Directive 2006/112 (the Principal VAT Directive), art. 14 which, it was agreed, remained applicable in the relevant period.
The UT also agreed with the FTT that, when it installed the devices, ISL did make a supply of services to policyholders, which would have been a taxable supply if it had been made for consideration. Reviewing the relevant CJEU authorities, the UT considered for there to be a supply for consideration there had to be:
- a supply of goods or services;
- a legal relationship between supplier and recipient;
- a reciprocal performance pursuant to that relationship;
- where the consideration was in services, a direct link between the supply and the provision of the services by the recipient; and
- the value of the services provided by the recipient had to be capable of being expressed in monetary terms.
The FTT had found there was a supply, and that the policy booklet gave rise to a legal relationship between ISL and the policyholders. The UT agreed. The installation fee paid by ISL to the third party that performed the installation service established the value of the service was capable of being expressed in monetary terms. The FTT must, therefore, have found there was no supply for non-monetary consideration on the basis of either the third or fourth criteria above. The UT concluded it was on the basis there was no direct link between the installation services and the services provided by the recipient. The FTT had taken into account and analysed all the material contracts and all the relevant circumstances and, on the facts, had found the services given by the policyholder were not given in return for the installation services but were to comply with a requirement of the insurer. The UT considered the FTT was justified in this conclusion.
On the alternative argument there had been consideration in the form of the money paid “out of the premium” the FTT had found the contractual position did not support this view. Instead, it pointed to the initial fitting being free to the policyholder with any subsequent payments on change of vehicle or early termination being for insurance, or to cancel the insurance, rather than being payments for the devices. The UT agreed with this analysis. There was no supply for consideration.
The UT found that a deemed supply would only occur if there had been some prior recovery of input tax. In this case, however, the cost of devices had been wholly attributed to an exempt supply of insurance and therefore no input tax had been deducted. Accordingly, there could be no deemed supply.
The appeal was therefore dismissed.
As was noted in the decision, VAT is rarely straightforward and this case highlighted not only the difficulty practitioners often find in attempting, first of all, to characterise precisely what is being supplied and to whom, but also the additional complexity created by the fact that some concepts have a different meaning for VAT purposes. In this case the meaning of “consideration” which is based on EU law and therefore quite different from the UK contract law meaning relied on by the appellant.
Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd.
Hui Ling McCarthy KC and Benjamin Parker, instructed by RSM UK Tax appeared for the appellants
Peter Mantle, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] WTGIL Limited ( the “Appellant”) was formerly called Ingenie Limited (“Ingenie”). As that was its name at the time of the events relevant to this appeal, and it was referred to by that name in the decision under appeal, we shall refer to it below as Ingenie.
[2] The appeal relates to the VAT treatment of certain supplies made by Ingenie Services Limited (“ISL”). Since ISL was a member of the VAT group of which Ingenie was the representative member, for VAT purposes those supplies were deemed to have been made by Ingenie, which is why it is the appellant in this case.
[3] The supplies related to a telematics device installed in cars as part of an insurance policy underwritten by a third party. The device, sometimes known as a black box, captures and transmits information about the way the car is being driven. Ingenie made a claim to HMRC that the provision and fitting of the devices were taxable supplies made by ISL to policyholders, so that Ingenie could recover the input tax attributable to such supplies. HMRC denied that claim, and Ingenie appealed against that decision to the First-tier Tribunal (Tax Chamber) (the “FTT”). In a decision released on 1 June 2022 (the “Decision”), the FTT dismissed Ingenie's appeal.
[4] Ingenie appeals against the Decision.
[5] References below in the form “FTT[x]” are to paragraphs of the Decision.
[6] The FTT helpfully summarised the background to the appeal before it as follows, at FTT [3]–[5]:
[3] ISL is an insurance intermediary which developed, marketed and sold telematics car insurance (also known as black box insurance) aimed primarily at 17 to 25 year olds. Ingenie and ISL are not insurers and the policies were underwritten by insurers from a panel appointed by ISL. As a condition of the insurance, a telematics device (the “Device”) must be fitted to the policyholder's car within ten days of the commencement of the policy. ISL agrees to provide the Device and fit it or arrange for it to be fitted. The Device captures and transmits information about the way the car is being driven, eg acceleration and deceleration/braking, cornering, speed, distance travelled, date and time of travel and location. ISL then collects and analyses the telematics data from the Device and provides an analysis of the policyholder's driving proficiency to the policyholder and to the insurer. The purpose of providing such data is to enable the policyholder to improve their driving and thus obtain cheaper car insurance. The data provided by ISL to the insurer allows it to monitor the policyholder's driving behaviour and to increase or decrease the premium accordingly.
[4] On 30 August 2018, Ingenie made a claim by way of Error Correction Notice for a refund of £2,084,149 input tax incurred in relation to the provision and fitting of Devices in the VAT periods 07/14 to 07/18. The claim was based on the view that the provision and fitting of Devices were taxable supplies made by ISL to the policyholders, whether or not for consideration, and the input tax was attributable to such supplies.
[5] In an undated letter sent on 25 July 2019, the Respondents (“HMRC”) rejected the claim. HMRC decided that there was no contract under which...
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