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8 May 20242 minute read

UK Upper Tier Tribunal decides that for there to be a supply for a consideration for VAT purposes five criteria must be satisfied

United Kingdom

Supply and fitting of “black box” device as condition of insurance policy was neither a “supply for consideration” to holders of insurance policies, nor was a deemed supply if the ability to deduct input VAT was originally absent.

WTGIL Limited’s VAT Group member Ingenie Services Limited (ISL) provided VAT exempt insurance intermediary services for car insurance policies (which required the use of a black box in policy holder’s car) for which ISL was paid commission plus GBP150 for fitting black box.

WTGIL’s VAT refund on costs attributable to fitting of the black boxes to policyholder’s cars, on the basis that these are supplies for either a non-monetary consideration (from the policyholder), a monetary consideration of GBP150 (paid by Insurer); or failing which a deemed taxable supply, was rejected by HMRC on the basis that the costs were attributable to exempt supplies.

The UT decided that although there was a supply of services to policyholders, there was no consideration because out of the following required elements for there to be a supply for consideration, elements 3 and 4 are missing:

  1. Supply of goods or services
  2. Legal relationship between supplier and recipient
  3. Reciprocal performance.
  4. Direct link between the supply and the provision of services by the recipient.
  5. Value of the services supplied by the recipient must be capable of being expressed in monetary terms.

Further, ISL’s argument of deemed taxable supply failed because the ability to deduct input VAT (required as per Article 16 of VAT Directive and paragraph 5 of Schedule 4 of UK VATA) was absent.


Key takeaway

In this decision the UT reminds of the tests to satisfy for there to be a supply for consideration.

Further, interestingly, contrary to HMRC’s argument that the black box fitting services were exempt as incidental to  the insurance intermediary services, the UT considered that these are separate services to policyholders albeit (in this case) no consideration was involved for VAT purposes.