Key Facts
- •WTGIL Limited (formerly Ingenie Limited) appealed a First-tier Tribunal (FTT) decision regarding the VAT treatment of supplies made by its VAT group member, Ingenie Services Limited (ISL).
- •ISL supplied and fitted telematics devices ('black boxes') to cars as a condition of insurance policies underwritten by third parties.
- •Ingenie claimed input tax recovery on the provision and fitting of the devices, arguing they were taxable supplies to policyholders.
- •HMRC rejected the claim, arguing there was no contract under which ISL supplied the devices to policyholders for consideration.
- •The FTT dismissed Ingenie's appeal, finding no supply for consideration and no deemed supply of goods.
Legal Principles
A transaction must be for consideration to be a supply for VAT purposes (unless a deeming provision applies).
Council Directive 2006/112/EC (Principal VAT Directive or PVD), Article 2(1)
A 'supply of goods' means the transfer of the right to dispose of tangible property as owner.
PVD, Article 14(1)
A transaction that is not a supply of goods is a supply of services.
PVD, Article 24(1)
The taxable amount includes everything which constitutes consideration obtained or to be obtained by the supplier in return for the supply.
PVD, Article 73
Insurance transactions, including related services performed by insurance brokers and agents, are exempt from VAT.
PVD, Article 135(1)(a)
VAT incurred on goods and services attributable to taxed transactions may be deducted.
PVD, Article 168
Where a supply comprises multiple elements, it may be treated as a single supply based on the predominant element.
HMRC v Gray & Farrar International LLP [2023] EWCA Civ 121
In determining the existence of a supply, the starting point is the relevant contracts, only going behind them if they don't reflect the true agreement.
ING Intermediate Holdings Ltd v HMRC [2017] EWCA Civ 2111
For a supply to be 'for consideration', there must be a supply, legal relationship, reciprocal performance, direct link between supply and consideration, and consideration capable of being expressed in monetary terms.
CJEU case law (summarized in Tolsma)
A deemed supply of goods arises under Article 16 PVD where VAT on the goods was wholly or partly deductible; this requires an actual input tax deduction.
PVD, Article 16; VATA 1994, Schedule 4, paragraph 5
Outcomes
The appeal was dismissed.
The FTT correctly concluded there was no supply by ISL to policyholders for consideration, either monetary or non-monetary. There was no direct link between the policyholders' actions (entering the insurance contract) and the installation service provided by ISL. Further, there was no deemed supply as input tax on the devices was not deductible.