Insurance is a separate supply

The taxpayer provided a radio support service to about 280 self-employed taxi drivers. Some 200 of those were owner-drivers but 74 rented a car from the taxpayer. They were charged £120 a week for the car and radio facilities and a further £45 a week was charged if the drivers wanted to take third-party liability cover through the company.

The taxpayer argued that the £45 was an exempt supply of insurance linked to a block cover policy taken out with an insurance company (VATA 19944 Sch 9 group 2). HMRC claimed it was one element of a multi-supply that should be treated as standard rated: the taxpayer was “not an insurer or an intermediary” and therefore the charges it made to drivers could not be insurance. Further a driver taking a fleet vehicle was already pre-insured so the extra cover gave no added value.