Hastings Insurance Services Ltd v Revenue and Customs
Robin Prince · Posted on: March 14th 2025 · read
The First-tier Tribunal (Tax) judgment in the case of Hastings Insurance Services Ltd v Revenue and Customs [2025] UKFTT 275 (TC) has significant implications for insurance intermediaries and their ability to recover VAT.
Background
Hastings Insurance Services Ltd (“Hastings”) is a UK based insurance intermediary. Hastings introduces UK customers to a related company, Advantage, established in Gibraltar, which provides insurance products to the final customers.
Hastings treated its input tax in relation to this activity as fully recoverable on the basis that supplies of insurance intermediary services provide to a non-UK recipient give the right to recover VAT.
Following previous unsuccessful litigation in 2016, HMRC introduced new legislation, the’ Offshore looping Regulations’, to limit VAT recovery in such arrangements. Hastings contended that these amendments were incompatible with Article 169(c) of the Principal VAT Directive (“PVD”), which allows VAT deductions for transactions where the customer is established outside the EU.
Key Issues
The tribunal addressed three main issues:
- Meaning of “Customer” in Article 169(c) PVD: Article 169(c) of the PVD requires the UK to allow the deduction of input VAT on supplies of insurance transactions where the customer is established outside the Community. Hastings argued that the “customer” should be interpreted as Advantage, the direct recipient of its services. HMRC contended that the “customer” should be the insured persons in the UK. The tribunal concluded that the ordinary and natural meaning of “customer” refers to the direct recipient of the services, which in this case is Advantage.
- Direct Effect of Article 169(c) PVD: It was agreed that Article 169(c) PVD is unconditional and sufficiently precise to have direct effect. This means that individuals can rely on this provision in national courts without the need for domestic implementing measures.
- Recognition of Direct Effect by Courts: The tribunal examined whether Article 169(c) PVD had been recognized by the CJEU) or any UK court or tribunal as having direct effect before the end of 2020. The tribunal found that Article 169(c) PVD has a close relationship with Article 168 PVD, which has been recognized as having direct effect. Therefore, Hastings can rely on the direct effect of Article 169(c) PVD.
Implications
This judgment has significant implications for insurance intermediaries that have faced restricted input tax recovery due to the Offshore Looping Regulations. The tribunal’s conclusion that Article 169(c) PVD has direct effect, even post-Brexit, limits HMRC’s ability to restrict input tax recovery in similar situations and could lead to other taxpayers making claims for refunds.
However, as this judgment only concerns periods prior to the adoption of REULA 2023, questions remain about the application of direct effect post-1 January 2024.
Insurance companies that have previously limited their input tax recovery in the past four years should consider whether they are now eligible to claim under-recovered input tax. Contact Robin Prince or your usual MHA advisor to discuss this further.
To find out more about the services MHA can offer, please contact our VAT team.
