Devices were an integral part of the transaction

The taxpayer formerly known as Ingenie was the representative member of a VAT group of which ISL was also a member. ISL supplied car insurance intermediary services to young drivers. A feature of the insurance was the installation of a black box – telematics device – in the policyholder’s car. The taxpayer claimed input tax on the provision and fitting of the black boxes on the basis they were taxable supplies made by ISL.

HMRC refused the claim saying the fitting of the devices in cars was part of an exempt insurance transaction not a separate taxable supply. Both the First-tier Tribunal and the Upper Tribunal dismissed the taxpayer’s appeal.

The Court of Appeal agreed with HMRC. Sir Launcelot Henderson said from the point of view of the policyholder the provision and fitting of the black box was an ‘essential component of the insurance’...