Weekly VAT News

The Prudential Assurance Company Ltd: VAT groups and continuous supplies – CA

In November 2007, Silverfleet Capital Ltd completed a management buy-out and left the Prudential VAT group. Since 2002 it had been providing fund management services to one of Prudential’s with-profits funds, and was entitled to an additional performance-related fee in the event that the fund exceeded certain benchmarks. Those benchmarks were eventually met in 2014 and 2015, triggering performance payments of £9.3m. Given that Silverfleet carried out its fund management services before it left the VAT group, but received the performance-related payment several years afterwards, should it charge VAT? Silverfleet’s management qualified as a continuous supply of services, and HMRC therefore considered that VAT had to be charged by reference to when the performance fee was invoiced and paid. The Court of Appeal, by a majority, agreed with HMRC. VAT rules on time of supply may have (based on the CA’s 1996 judgment in BJ Rice) been seen as determining “when, but not whether” VAT was due. However, that approach had been qualified by subsequent judgments of the House of Lords (in Thorn, Svenska, and RSA), to the point where BJ Rice should not be treated as binding precedent in Silverfleet’s appeal. The correct approach was to consider whether Silverfleet was still a member of Prudential’s VAT group when the rules on time of supply treated its services as supplied. By 2014 it was no longer a VAT group member, and must therefore charge VAT. Silverfleet’s appeal was dismissed. (Contact: Andrew Clarke) 

WTGIL Ltd: VAT on black box insurance – UT

WTGIL Ltd (formerly Ingenie Ltd) was set up in 2010 to provide black box insurance to young drivers. It entered into agreements with a panel of insurers, marketed insurance through its own website and through price comparison websites, and engaged Ageas to administer the policies. Drivers were required to have Ingenie’s telematics devices fitted to their cars, and the information from them would be used to review premiums several times a year (reducing the insurance cost for young drivers who demonstrated the quality of their driving). Ingenie made a claim to HMRC to recover VAT incurred on purchasing the devices, which HMRC rejected. The Upper Tribunal has dismissed Ingenie’s appeal. The UT ruled that Ingenie was not supplying goods (the devices) to the drivers at the start of the policy, and then considered whether Ingenie was supplying services to the drivers. It identified that there was a supply of services which could not be classified as an exempt insurance intermediation service. However, there was no direct link between those services and any consideration provided by the driver. Based on the terms of the policy booklet, and as a matter of commercial and economic reality, the driver was agreeing to pay a premium to the insurer, and not to do something for Ingenie that might constitute non-monetary consideration. The UT also agreed with the First-tier Tribunal that there was no monetary consideration paid to Ingenie for its services, and that there was no deemed supply of the devices under the business gift rules (as Ingenie had never recovered VAT on their purchase). Consequently, there was no taxable supply of services for consideration that entitled Ingenie to recover input tax, and its appeal was dismissed.  (Contact: Donna Huggard)

VAT deregistration and EORI numbers

The Chartered Institute of Taxation (CIOT) has reported that HMRC have notified them regarding an update to VAT and EORI guidance, namely that “If a business deregisters for VAT, any Economic Operators Registration and Identification (EORI) number(s) they hold will also be removed at the same time”. If a business still needs an EORI number, they can apply for a new GB EORI number. According to the statement, “the number is usually confirmed immediately”. When a business has a GB EORI number, it will then be able to apply for an XI EORI number (for Northern Ireland trade), which “will be issued within five working days of applying”. (Contact: Jeffrie Mann)