In Wheels Private Hire Limited v HMRC [2017] UKUT 0051 (TCC) the Upper Tribunal (UT) held that a taxi firm made two independent supplies to its drivers for VAT purposes: an exempt supply of insurance and the standard rated hire of cars.

  • The taxpayer (‘Wheels’) runs a taxi business, and rents out cars to its drivers where they do not have their own vehicles.
  • Drivers are given the option of arranging their own insurance, or purchasing cover from Wheels for an additional weekly sum.
  • Wheels in turn obtained insurance from a broker.
  • HMRC claimed that, where Wheels provided insurance, they were making a single supply of an insured vehicle, and VAT was chargeable on the whole of the consideration received.

The First Tier Tribunal (FTT) found in favour of the taxpayer, finding that they made two separate and independent supplies of:

  • Vehicles which were standard rated, and
  • Insurance which was exempt.

The UT has now upheld this decision, finding that:

  • The provision of insurance and the supply of the vehicle were separate and independent supplies
    • Just because you both lease an asset and insure it that is not in itself enough to make the supplies so closely linked that they form a single transaction: there has to be some other factor linking them.
    • The fact the vehicles had to be insured did not mean that the hire of the car and insuring it had to be regarded as a single supply.
    • The fact that Wheels made a separate additional charge for the insurance, and that the drivers had the option of arranging their own insurance supported the supplies being separate (but were not on their own decisive).
  • Wheels, though not an insurer itself, was performing an exempt insurance transaction when it procured insurance for the drivers under a policy it held with an insurer.
    • Whether the insurance was a block policy, a group policy or fleet policy was not relevant.
    • The fact that Wheels made a small profit on the insurance did not mean it was not providing insurance services.

HMRC’s appeal was therefore dismissed.


Our subscriber guide: Single or multiple supply?

Case reference: Wheels Private Hire Limited v HMRC [2017] UKUT 0051 (TCC)

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