Nature of supply of vehicle insurance to black cab drivers

The taxpayer rents out black cabs to self-employed drivers. The drivers have the choice of arranging their own insurance cover or instead paying an extra contribution to the taxpayer to take advantage of the fleet insurance policy it had negotiated with an insurance company.

The commercial reality was that the company’s policy was cheaper and had more benefits than a policy a driver could negotiate himself so 99% of drivers used the company’s policy rather than their own. HMRC saw this as significant. It decided the taxpayer was making a standard-rated supply of ‘an insured taxi’ and there was no separate supply of insurance. The department also claimed that it would be artificial to split the payment made by drivers between vehicle hire and insurance.

The taxpayer appealed.

The First-tier Tribunal found that as far as separate insurance was concerned ‘the possibility or option remained open’...