In Hastings Insurance Service Limited v HMRC [2018] TC06306, the First-Tier Tribunal (FTT) concluded the Gibraltarian company to which brokering services were provided did not have a UK fixed establishment, the supply was not exempt, and VAT was recoverable.

  • Hastings Insurance Services Limited (H) provided insurance services in the UK.
  • It provided broking, underwriting support and claims handling services to a connected party (G), based in Gibraltar.
  • G underwrote the UK car and motorbike policies and made supplies to UK customers acting through H as its broker or intermediary.

The key issue was what the Place of supply of the services from H to G was:

  • If those services had a UK place of supply, then the supplies would be exempt insurance related supplies. H would then be unable to recover VAT associated with that income.
  • If the services had a Gibraltarian place of supply, applying the normal business to business (B2B) place of supply rules, then H would be entitled to recover VAT as it is a supply to a non-EU business.

The place of supply under the B2B rules depends on where the customer, i.e. G, ‘belongs’. This will be the Business Establishment (BE), or Fixed Establishment (FE), or where the BE and FE are in different locations, it will be the establishment out of those that is most directly concerned with the supply.

It was agreed that the BE of G was Gibraltar.

HMRC’s view was that G had an FE in the UK:

  • It controlled H’s supply of services through the contractual arrangements.
  • This meant it had sufficient human and technical resources in the UK, through H’s staff and systems, such that it had an FE in the UK.

HMRC’s view was also that the FE should be considered the most directly concerned establishment with the supply as to accord that to the BE would lead to an irrational result.

The FTT analysed the case in detail and their decision, spanning over 130 pages was as follows:

As to whether G had an FE in the UK:

  • FE must be of a minimum size with both human and technical resources ‘necessary’, ‘adequate’, or ‘suitable’ (i) for the provision of supplies to be made on an independent basis, or (ii) to enable the establishment to receive and use relevant supplies for its own needs at that location.
  • Those resources must be permanently present: they must have a minimum degree of stability derived from the permanent presence of those resources.
  • H and G were separate commercial business which made separate decisions and managed their own businesses.
  • Each had their own profit targets, own commercial aims, and own financial risks.
  • G, using its own staff from Gibraltar, make decisions on net premium prices, who to insure, what to ensure, and at what risk price.
  • H decided its own commission levels to help achieve its required gross premium.
  • H was free to, and did, act for other insurers and provided the same service to those other insurers.
  • G did not exercise control through the contractual arrangements with H. It set the scope for those services, but this did not amount to having an FE through H.
  • The provision of the insurance services had two key functions:
    • The underwriting of the risk, i.e. providing the cover.
    • The selling and administration of that risk
  • G did not provide the underwriting in the UK. This was provided in Gibraltar. Therefore, G was not carrying out the key function of selling and administering the risk in the UK.
  • H was not carrying out the key function of underwriting the risk. This means that G could not, even if it controlled H, be carrying out all the key functions required for it to be providing insurance services in the UK.
  • This means G does not have a UK FE and does not belong in the UK.

The FTT also said that, in the event that conclusion was incorrect, and G did have a UK FE, where services are used in an unidentifiable and nonquantifiable manner, or where it is a case of doubt, the BE should take priority when considering which establishment is more directly connected to the supplies.

H’s appeal was allowed. Its supplies were to a non-EU business and it was entitled to recover its VAT.

HMRC have applied to the FTT for permission to appeal.


Place of supply: services

Permanent establishment & residence

External link: Hastings Insurance Service Limited v HMRC [2018] TC06306