VAT: Wheels Private Hire Ltd – Upper Tribunal decision | KPMG | UK
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VAT: Wheels Private Hire Ltd – Upper Tribunal decision

VAT: Wheels Private Hire Ltd – Upper Tribunal decision

The Upper Tribunal has dismissed HMRC’s appeal, concluding the taxpayer made a separate exempt supply of insurance.


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 The taxpayer operates a taxi business. For drivers who do not have their own cars, they hire out vehicles and radios to drivers for £120 per week on which they charge VAT. All vehicles are required to be insured by law in order to be driven on the roads. Drivers can arrange their own insurance or can choose to buy the insurance from the taxpayer for £45. The taxpayer has a fleet contract with a third party insurance company. The Upper Tribunal (UT) dismissed HMRC’s appeal, concluding that an optional charge for an insurance to drivers is a separate supply of insurance. The UT also relied on the BGZ Leasing Court of Justice of the European Union (CJEU) judgment, which was not considered at the First-tier Tribunal (FTT). Whilst most drivers took up the insurance, this did not prevent the optional insurance service provided for a separate charge from being a separate supply.

The UT noted its surprise that the BGZ Leasing (C-224/11) (BGZ) CJEU judgment was not raised at the FTT. The UT noted the similarities between BGZ and this case, which concerns leased cars and the recharging of insurance. The UT decision looks at the CJEU judgment in detail, pointing out one error in the English version and explaining what key paragraphs of the judgment mean.

Scope of the insurance exemption – HMRC considered that the FTT had erred in concluding that the supplies were exempt under the expanded definition in CPP

Para HMRC argued The UT said
33 & 38 Wheels could not bind cover
on behalf of insurers and did not extend the scope of the cover.
Yes they could bind. Wheels could add new drivers to the insurance policy throughout the year, subject to satisfying certain conditions. As per BGZ, the key is whether the drivers obtained insurance cover and they did.As in CPP, Wheels is not an insurer, but performs an exempt insurance transaction when it procures cover. 
34 BGZ
could be distinguished on the basis that it was the lessor that required the
There is nothing toindicate in the BGZ judgment that the requirement by the lessor or law is relevant in determining the nature of the supply.  
35 CPP does not apply because there was no block policy. Whether the insurance is procured under a block policy, a group policy or a fleet policy is irrelevant to the issue as to whether there is an insurance transaction.
39 / 40 Wheels makes a profit
whereas BGZ leasing onward supplied
at cost.
That was a fact in BGZ due to the fact it was BGZ who was the insured. This is not the case in Wheels. The existence of a profit does not preclude the application of CPP

Single versus multiple supply – The UT goes through the key European case law and reproduces the 12 principles originally in the UT’s decision in The Honourable Society of Middle Temple. The UT’s starting point was taken from the CJEU’s statement in BGZ that, as a general rule, a leasing service and the supply of insurance for a leased item cannot be regarded as being so closely linked that they form a single transaction, even though the insurance is for the leased item. The UT considered the optional nature and separate charge for the insurance provided by Wheels were significant indicators of a separate supply, but not decisive. Taking all the factors into account, however, the UT concluded there was a separate VAT exempt supply of insurance.


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