VAT exemption for insurance: Court of Appeal overturns Upper Tribunal in WTGIL Ltd v HMRC

In WTGIL Ltd v HMRC (11.04.25), the Court of Appeal considered the scope of the exemption from VAT for insurance transactions. Overturning a decision of the Upper Tribunal, the Court held that the installation of a “black box” into a motor vehicle that tracks driver behaviour was provided “in the course of acting as an insurance intermediary”, integral to the insurance product and the supply was therefore exempt from VAT.

The insurance intermediary, ISL, arranged insurance policies for young drivers and also installed black boxes in their cars. The black box device is fitted into the car to track driving behaviour, and the insurance premiums may be adjusted depending on how safely the policyholder drives. This kind of insurance is often called “telematics” motor insurance or “black box insurance”.

ISL argued that its supply and installation of these devices was a separate service, and it should be entitled to claim back the input tax on the cost of buying and fitting them.

The Court’s decision

The Court of Appeal disagreed with the taxpayer, finding that:

• The provision and fitting of the black box was not a separate supply but a core part of the insurance product, because the insurance policy can only be implemented if the device is installed. It was commercially unrealistic to split out the provision of the black box from ISL’s wider insurance-related services. The services were inextricably and necessarily part of ISL’s role as an insurance intermediary.
• The installation of the black box was therefore integral to the nature of the insurance product being sold and so was part of an exempt insurance service provided by ISL “in the course of acting in an intermediary capacity”.
• The installation of the black box device was an exempt supply even though it was not installed until after the insurance contract had concluded.
• ISL was therefore not entitled recover the input tax incurred on acquiring and fitting the device.

Why it Matters

This case is particularly relevant for motor vehicle insurers and intermediaries as it confirms that, if the installation of a device by an insurance intermediary is integral to the insurance product, the installation service is exempt from VAT.

For those in the insurance industry more widely, the Court presented a clear analysis of the scope of the insurance exemption and provided helpful clarity on the approach to be taken in considering whether a particular supply is exempt. Although the exemption from VAT for insurance and reinsurance should be construed strictly (as should the other exemptions), it “should extend to ‘related services performed by insurance brokers or insurance agents’ looking at the matter as one of commercial substance and reality”.

Comment

For insurers and insurance intermediaries, particularly those which make both taxable and exempt supplies (and who are therefore “partly exempt businesses” for VAT purposes), this decision is therefore an important reminder to carefully consider the VAT treatment on all supplies, viewed in terms of their  “commercial substance and reality”,  and the impact on their ability to recover input tax.