VAT Recovery for Insurance Intermediaries Hastings Insurance Services Limited Case

From 1 March 2019, the UK introduced Offshore Looping Regulations (SI 2018/1328), amending the UK Specified Supplies Order (SI 1999/3121), to ensure there was only input VAT recovery where policyholders were outside the UK. Previously, VAT recovery was allowed for supplies to non- EU (Post Brexit , non-UK) customers regardless of the policyholder's location.

Hastings Insurance Services Limited (Hastings) an insurance agent , making supplies to the insurers, challenged HMRC's rejection of VAT recovery claims on supplies made to non-EU insurers where the underlying policyholders were in the UK, for periods from 1 January 2019 to 31 December 2022. Hastings argued that its customer was the Gibraltar-based insurer, not the UK policyholder, and thus it was entitled to VAT recovery due to the direct effect of Article 169(c) of EC Directive 2006/112 (PVD) . Hastings claimed the Offshore Looping Regulations were incompatible with Article 169 as the UK provision restricts VAT recovery where the insured is in the UK, even if the recipient of Hastings' supplies were outside the UK. Hastings also argued that Article 169(c) has direct effect in the UK for return periods before and after Brexit.

The tribunal ruled in favor of Hastings, concluding that "customer" within the meaning of Article 169 (c ) refers to the direct recipient, Gibraltar-based insurer, not the UK insured. Due to the incompatibility of Offshore Looping Regulations with Article 169(c) of PVD, Hastings could rely on Article 169(c) for the disputed periods.

This ruling allowed UK-based insurance agents to recover input tax on supplies to non-EU insurers, even if the policies involve UK policyholders.

Key takeaway

This ruling is a significant development for insurance intermediaries impacted by the Offshore Looping Regulations introduced by HMRC in 2019. It is crucial for intermediaries to review their VAT positions and submit protective refund claims promptly to avoid being out of time to make claims later.

An important unanswered question is whether the opportunity for VAT recovery will persist beyond 2024. In particular following REULA 2023, effective 1st January 2024, EU law no longer has supremacy where incompatible with UK law.

Reference

Hastings Insurance Services Limited v The Commissioners for HMRC [2025] UKFTT 275 (TC)