Tripartite insurance intermediary arrangements and VAT

The Court of Appeal has held that services provided by an insurance intermediary consisting in the provision and fitting of a "black box" device in an insured's vehicle fell within the scope of the exemption for insurance related supplies: WTGIL v HMRC [2025] EWCA Civ 399. The Court's decision emphasises the importance of viewing the whole of the arrangements between insurer, policyholder and insurance intermediary realistically and warns against over-compartmentalising different elements of a supply. In this case, policyholders were simply seeking insurance, the provision of the devices was not an aim in itself and it would be artificial to treat the provision of the device as something separate to the general insurance intermediation activities performed, especially since the intermediary agreed with both insurer and insured that such devices should be fitted.

Background

WTGIL (formerly Ingenie) was an insurance intermediary which developed a form of car insurance aimed primarily at 17 to 25 year-olds. It introduced customers to insurers (both via its own website and comparison sites) to offer insurance which included the condition that a telematics device must be fitted to the insured's vehicle. Ingenie agreed with insurers to provide and fit the device, which provided information about the way the car was driven. Ingenie analysed the data and provided that analysis of the insured and the insurer. The data allowed to the insurer to monitor the insured's driving and to increase or decrease the premium accordingly. In return, Ingenie received a commission of 10% of the premium plus £150 for the fitting of a device to the insured's car. Where the insured already had a device fitted (for example, on a policy renewal), the commission was simply 10% of the premium. The terms of the insurance between insurer and policyholder provided that there was no fee for the first fitting of a device, albeit a fee of £165 would be charged if the policy was cancelled within the first year.

Ingenie sought to recover input VAT incurred on the provision and fitting of the devices, taking the view that it was attributable to a separate taxable supply to policyholders. HMRC rejected the claim. HMRC considered that the only consideration for Ingenie's supplies was the commission paid to Ingenie by the insurer, which was consideration for an exempt supply of insurance intermediary services under VATA 1994 Schedule 9 Group 2 Item 4 ("The provision by an insurance broker or insurance agent of any services of an insurance intermediary"). Accordingly, the input tax was attributable to an exempt supply and not deductible.

Ingenie argued that the input VAT was attributable to a separate taxable supplies consisting of the provision and fitting of a device on commencement of an insurance policy in return for either: (i) non-monetary consideration provided by the insured by entering into the contract of insurance; or (ii) monetary consideration being £150 commission payable to Ingenie on the first provision and fitting of the device.

The FTT and UT rejected those arguments. The FTT essentially held that there was no separate supply for consideration made by Ingenie to the policyholders in providing and installing a device. The UT held that, whilst there was a supply of services by Ingenie to policyholders, there was no consideration provided for that supply in either monetary or non-monetary form. Ingenie appealed to the Court of Appeal. Before the Court of Appeal, it was accepted as common ground that the relevant supplies were supplies of services and not goods.

Decision of the Court of Appeal

The Court of Appeal has taken a somewhat different approach to the case to the tribunals below. Rather than looking to see if there was a separate supply for consideration to policyholders, the Court of Appeal considered that it was logical to start with HMRC's broader argument that the services provided by Ingenie consisting of the provision and fitting of devices were exempt services falling within VATA 1994 Schedule 9 Group 2 Item 4. The Court noted that since Ingenie was clearly acting as an insurance intermediary introducing customers for telematics motor insurance to insurers, it was "natural to ask why the provision and fitting of the Devices, which are an integral and indispensable part of the insurance product offered under the Ingenie brand, should be treated differently from other activities".

The UT had rejected HMRC's argument that the installation services fell within the insurance intermediary exemption. The UT considered that the act of installing a device was not performed by Ingenie in the course of acting in an intermediary capacity and although Ingenie's overall services might involve bringing together insurers and insureds in a general sense, the service of fitting a device was not remunerated by policyholders for bringing the parties together.

In contrast to the UT's approach, which focussed on the particular element of the service in isolation, the Court of Appeal has emphasised the need and importance to "have regard to all the circumstances in which the transaction(s) take place and to consider the whole of the relationships between the various parties".

The Court noted that essentially the case involved the role of Ingenie in promoting a form of specialised motor insurance. Viewed from the perspective of the prospective customer, the provision and fitting of a device is an essential component of the insurance and is not an end in itself. Policyholders would see the policy as a single transaction in return for an annual premium. Importantly, there was nothing in the contractual documentation to detract from that analysis.

The Court considered that it was a perfectly natural use of language to describe the activities of Ingenie as "related services performed by insurance brokers and insurance agents" (Article 135(1)(a) of the Principal VAT Directive). Turning to the VATA 1994, the Court considered that the services fell within Note (1)(b) as "the carrying out of work preparatory to the conclusion of contracts of insurance" (even though they were not actually fitted until after the insurance was in place) or (c) as "the provision of assistance in the administration and performance of such contracts".

As a result, the Court of Appeal disagreed with the UT's conclusion that Ingenie was not providing the service of fitting the devices in the course of acting in an intermediary capacity. Quite the opposite. The Court considered that the economic substance and reality of the tripartite relationship between insurer, insured and Ingenie was that the fitting of devices was performed as part of its activities as acting as an insurance intermediary. This was reinforced by the inclusion in the commission paid to Ingenie of £150 for fitting and the fact that Ingenie agreed with the insurers that such services should be provided (such that providing the services constituted fulfilment of its obligations to insurers).

As a result, the Court accepted HMRC's overriding argument that any services provided by Ingenie in fitting devices to policyholders vehicles fell within the exemption from VAT. Accordingly, it was not necessary to consider the remaining issues argued by Ingenie, including the argument that consideration was provided for such services in the form of a barter arrangement.

Comment

Before the lower tribunals, this case was largely concerned with "beguiling" arguments around barter as consideration, on the basis that the policyholder must have entered into the insurance as consideration for its contractual arrangement with Ingenie allowing it to install a black box device. Those arguments ultimately failed on the basis that mere linkage is insufficient to give rise to the necessary reciprocity and direct link to amount to consideration. For a full review of the UT decision, see Tripartite insurance arrangements and barter.

In contrast, the decision of the Court of Appeal emphasises the importance of standing back and viewing the arrangements as a whole and in context. The Court was critical of the UT's approach in over-compartmentalising the service of provision and fitting of devices. Since there was nothing in the contractual arrangements to indicate otherwise, it was simply artificial and unrealistic to exclude these services from the over-arching supply of insurance intermediary services that was undoubtedly the main activity of Ingenie.