WTGIL Limited v The Commissioners for HMRC

A telematics device installed under a motor insurance arrangement may involve a taxable supply of installation services, but VAT liability requires more than a contractual relationship. The taxpayer must establish reciprocal performance and a sufficiently direct link between the service and the consideration. Entering into an insurance policy, or complying with a condition requiring installation, does not necessarily constitute consideration for a separate supply by the installer. The contractual documents and the economic and commercial reality must be assessed together. A deemed supply of goods under Article 16 of the Principal VAT Directive and paragraph 5 of Schedule 4 to the Value Added Tax Act 1994 requires an actual whole or partial deduction of input tax independently of the deeming provision.

Ingenie Services Limited supplied telematics devices and related services in connection with motor insurance policies underwritten by third-party insurers. WTGIL, as representative member of the relevant VAT group, claimed that the provision and fitting of the devices were taxable supplies to policyholders, enabling recovery of input tax. HMRC rejected the claim.

The First-tier Tribunal dismissed the appeal, holding that there was no supply to policyholders for consideration and no deemed supply of goods. The Upper Tribunal considered whether there was a supply of goods or services, whether any supply was made for monetary or non-monetary consideration, and whether the conditions for a deemed supply were met.

1. Appeal dismissed. The Upper Tribunal upheld the First-tier Tribunal’s decision.
2. Installation of the telematics device was a supply of services capable of being made to policyholders. There was no supply of goods on installation because the right to dispose of the device as owner remained with Ingenie. The data collection and analysis services were outside the scope of the appeal.
3. The relevant VAT test required:
   1. a supply;
   2. a legal relationship;
   3. reciprocal performance;
   4. a direct link between the supply and the consideration; and
   5. consideration capable of monetary expression.
   The legal relationship need not be an enforceable contract, but its existence does not establish consideration.
4. The contractual documents, viewed as a whole and consistently with economic and commercial reality, did not show that policyholders entered into the insurance contract or accepted installation as consideration for Ingenie’s installation service. The insurance policy merely required a working device as a condition of insurance. The commission paid by the insurer was consideration for insurance intermediary services supplied to the insurer, not monetary consideration supplied by policyholders for installation. Charges on cancellation and vehicle changes were likewise payments connected with the insurance contract, not consideration for a taxable supply by Ingenie.
5. The installation service was not shown to be an exempt insurance intermediary service supplied in an intermediary capacity to policyholders under Group 2 of Schedule 9 to the Value Added Tax Act 1994.
6. A deemed supply under Article 16 of the Principal VAT Directive and paragraph 5 of Schedule 4 to the Value Added Tax Act 1994 required actual whole or partial deduction of input tax independently of the deeming provision. Ingenie had made no such deduction. Church of England Children’s Society v HMRC [2005] STC 1644 did not support a contrary result.

• Upper Tribunal (Tax and Chancery Chamber): appeal dismissed.
• First-tier Tribunal (Tax Chamber): appeal dismissed in the decision released on 1 June 2022.