Customs and Excise v Century Life Plc

VAT exemption for insurance-related services depends on the nature of the service and the status of the supplier. The supplier need not perform the service while acting in the particular capacity of an insurance agent, provided that the supplier is an insurance agent and the service is related to an insurance transaction.

The expression “related services” requires a close nexus with the relevant insurance transaction. A merely remote or incidental connection is insufficient. Services concerning the administration, review and performance of existing insurance contracts may qualify, including where the contracts were entered into in the past.

Century Life Plc provided services to Lincoln Assurance Ltd in reviewing pension policies, identifying mis-selling and arranging redress. The VAT Tribunal decided that the services were taxable. Moses J reversed that decision, holding that the services fell within the exemption for insurance transactions and related services.

The Commissioners appealed. The principal issue was whether the exemption required Century Life to provide the services while acting in the capacity of an insurance agent, and whether the services were sufficiently related to the pension transactions.

1. Appeal dismissed. The services supplied by Century Life fell within the exemption in Article 13B(a) of the Sixth Directive (77/388/EEC), implemented by paragraph 4 of Group 2 of Schedule 9 to the VAT Act 1994.
2. The phrase “performed by insurance brokers and insurance agents” identifies the supplier. It does not impose an additional requirement that the supplier must be acting in the capacity of an insurance agent when performing the particular service. The relevant service must instead be a service related to an insurance transaction, and the supplier must be an insurance agent. Century Life was accepted to be an insurance agent.
3. The expression “related services” should be construed narrowly in accordance with the principle that exemptions are exceptions to the general rule of taxation. A service must have a close nexus with the insurance transaction. Remote or incidental services, such as general secretarial or computer services, would not qualify.
4. Century Life’s work had the required nexus. Reviewing the individual policies for compliance, determining whether redress was due, calculating redress and arranging settlement concerned the administration and performance of the contracts. The fact that the policies had already been sold did not prevent the services from relating to continuing obligations under them.
5. The domestic legislation led to the same result. The services constituted assistance in the administration and performance of insurance contracts under note 1(c), and Century Life acted as an intermediary between Lincoln and the insured persons within note 2(b).
6. The Court refused a reference to the European Court of Justice. The appeal was dismissed with costs.

• Court of Appeal (Civil Division): dismissed the Commissioners’ appeal and refused a reference to the European Court of Justice.
• High Court, Queen’s Bench Division: Moses J reversed the VAT Tribunal’s decision on 6 March 2000.
• VAT Tribunal: Dr Avery Jones CBE decided in favour of the Commissioners on 14 December 1998.