Court of Appeal Confirms VAT Exemption of supply and fitting of ‘black boxes’ in insurance contracts

WTGIL Limited’s (formerly Ingenie) VAT Group member, Ingenie Services Limited (ISL), provided VAT-exempt insurance intermediary services for car insurance policies underwritten by third parties, which required the use of a black box in the policyholder’s car. Insurers paid ISL a commission for each policy sold, plus GBP150 for the black box fitted to the car if the policyholder’s car didn’t already have one.

ISL claimed a refund of the VAT paid on the cost of purchasing and fitting the device, arguing that these costs were attributable to installations that should be treated as separate taxable supplies. They contended that these were either barter/deemed supplies to the policyholder or taxable supplies to the insurer in return for the GBP150, distinct from ISL’s insurance intermediary services.

HMRC, however, maintained that the installation of black boxes was integral to the insurance intermediary service and should be VAT-exempt, with no VAT recovery.

The Court of Appeal upheld the decisions of the Upper Tribunal and First-tier Tribunal, agreeing with HMRC’s stance. The court concluded that the telematics devices are integral to the VAT-exempt insurance intermediary services and accordingly the input tax related to the devices was irrecoverable. Here, the services of providing and fitting the devices by ISL were an integral and essential element of the insurance transactions and it would be artificial and unrealistic to exclude them. The court emphasized the importance of viewing the transaction in its entirety, considering the commercial substance, reality, and contractual terms.

Key takeaway

This decision underscores the importance of considering the overall commercial circumstances of transactions. Services that are integral to a primary exempt supply, such as insurance intermediary services, may constitute part of a composite exempt supply restricting input VAT recovery. Interestingly, the concept of “preparatory” to the insurance transaction does not necessarily mean in time, but is broader. Consulting with VAT specialists is advisable to ensure compliance and optimize tax treatment in light of this decision.

Reference

Court of Appeal Judgment Template WTGIL Ltd [2025] EWCA Civ 399