In Safestore Ltd v HMRC [2020] UKUT 322, the Upper Tribunal (UT) confirmed Safestore acted as an insurance principal when selling products for its Guernsey business.

Safestore Ltd supplies storage facilities and these are liable to VAT at the standard rate. The company also requires that customers take out insurance to cover the goods' risk of loss or damage.

  • Safestore insists that domestic customers use its captive insurance business based in Guernsey. Safestore collects the premiums, passing only 70% of that premium to its captive business.
  • Safestore held that such a supply to a non-EU resident gave it an entitlement to recover input VAT, in this case about £800,000. In addition, it argued that it acted as an insurance intermediary and not as the supplier of insurance to the customer.

HMRC rejected the input VAT reclaim with a counter-argument that Safestore itself supplied insurance to its UK customers and raised an assessment for £72,615 of over-recovered input VAT.

  • Safestore appealed the case to the FTT.
  • The FTT concluded that Safestore acted as the supplier of the insurance to its customers as its captive business provided a block policy to Safestore and Safestore supplied the insurance to its customers.
  • The FTT ruled against Safestore and it appealed to the UT.
  • The UT agreed with the FTT that Safestore supplies insurance services rather than acts as an insurance intermediary as the block policy was between Safestore and its captive insurance business.

The appeal was dismissed.

  • As a result, Safestore could not be regarded as providing intermediary services: its supplies were not exempt from VAT as supplies of insurance. 

Useful guides on this topic

Agents and principals
Where someone is acting as an agent for a principal, it is possible that the income received by the agent on behalf of the principal is outside the scope of VAT for the agent. What is an agent for VAT purposes? When do these rules apply?

Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

External links

Safestore Ltd v HMRC [2020] UKUT 322

VAT notice 701/36 on insurance


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