VAT CASES - 28.10.2016

Wheels Private Hire Ltd v HMRC [2015] UKFTT 363 (TC). Insurance

The case. This case concerned the VAT liability of optional third party insurance supplied to self-employed taxi drivers together with car hire. Wheels Private Hire Ltd (W) had treated this as exempt but HMRC ruled that this was taxable and assessed it for £66,859.

The facts. W provided a radio support service to about 280 self-employed taxi drivers. They were charged £120 per week for the car and radio facilities, and a further £45 per week was charged if the drivers wanted to take third-party liability cover through the company.

W argued that the £45 was an exempt supply of insurance linked to a block cover policy taken out with an insurance company (Sch 9 group 2, Value Added Tax Act 1994) . HMRC claimed it was one element of a multiple-supply that should be treated as standard-rated.

The First-tier Tribunal (FTT) noted that cover notes were issued for individual vehicles identified by registration number rather than the name of the driver. However, W decided who should drive each car and the insurer required details about the drivers, their licences and driving records. The insurance protected the drivers against liabilities to third parties.

The decision. The FTT said the vehicles had to be identified by their registration numbers to satisfy the insurance provisions, but “that should be viewed in conjunction with the appellant’s strict regulation of who is permitted to drive them”. In this way the drivers were insured against third party liability.

In the view of the FTT, the cover was “a separate and independent supply, optional from the viewpoint of the driver, and separate from the supply of the vehicle and the supporting radio service” so the appeal was allowed.