In Supercar Drive Days Limited v HMRC [2018] UKFTT TC06311, the First-Tier Tribunal found that collision damage waiver payments were not exempt supplies of insurance.

  • The taxpayer provides supercar driving experiences. These were typically in the form of ‘track days’.
  • Under the terms of the experience, the buyer is liable for the first £2,500 plus VAT of any damage incurred, beyond normal wear and tear.
  • This liability can be avoided if the participant opts to take out the company’s £25 - £30 Collision Damage Waiver.
  • HMRC took the view that the waiver was not insurance but was a taxable supply for VAT purposes.
  • The taxpayer appealed on the basis that it was an exempt supply of insurance:

The FTT found in favour of HMRC:

  • The terms of the contract impose a potential liability of up to £2,500 on the buyer.
  • The participant can accept the risk of imposing this liability on the buyer or can remove that risk by paying an extra sum, the waiver.
  • Whilst the practical effect is similar to purchasing insurance, the legal nature of the transaction is simply to vary the potential liability of the buyer.

The FTT acknowledged that the situation could be different, for example if they had offered to arrange insurance for any liability in return for a payment, but this was not what happened in this case.

The full case can be read here.


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