In Claims Advisory Group Limited v HMRC [2021] UKUT 0199, the Upper Tribunal (UT) confirmed that claiming Payment Protection Insurance (PPI) compensation on behalf of individuals was not a VAT exempt supply of insurance services.

  • Claims Advisory Group Limited (CAG) made claims on behalf of individuals who had been mis-sold PPI.
    • Where claims were successful, the relevant financial institution would repay the PPI premiums previously paid, plus interest.
    • CAG received a fee for its claim services which was based on a percentage of the compensation paid.
  • CAG argued that its fees were exempt from VAT.
    • Insurance and reinsurance transactions and related services performed by insurance brokers and insurance agents are exempt from VAT under Group 2 of Schedule 9 to the VATA 1994.

In 2019, the FTT found that the supplies made by CAG were standard rated. The essence of an insurance contract is indemnity against a risk. That was not present in this case.

  • CAG was assisting its customers with the making of claims for compensation, not the termination of insurance relationships or providing insurance transactions or services related to insurance contracts.
  • For similar reasons, the FTT rejected the alternative argument that the company was an insurance agent.

CAG Appealed to the UT on the basis that the FTT erred in law. The UT dismissed all grounds of appeal, agreeing with the findings of the FTT.

  • CAG’s supplies to its customers did not fall within the VAT exemption as they were not insurance transactions or services performed by an insurance agent that were related to insurance transactions.

Useful guides on this topic

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?

PPI claims company was not providing insurance
In Claims Advisory Group Ltd v HMRC [2019] TC07308 the First Tier Tribunal decided that a company engaged in recovering personal protection insurance (PPI) was not itself making an exempt supply of insurance services.

Registering for VAT
When should a business register for and charge VAT? What are the VAT registration limits and VAT rules after Brexit? What penalties might HMRC issue for late notification of registration?

External link

Claims Advisory Group Limited v HMRC [2021] UKUT 0199


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