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Provision of compensation does not qualify as insurance

24 August 2021
Issue: 4806 / Categories: Tax cases

Claims Advisory Group Ltd v CRC, Upper Tribunal (Tax and Chancery Chamber), 16 August 2021


The taxpayer made claims on behalf of individual customers who had been mis-sold payment protection insurance (PPI). When the claims were successful the customers received compensation equal to the PPI premiums they had paid plus interest. The taxpayer received a percentage of the compensation as a fee for its services.

It considered the services it provided were exempt from VAT as insurance transactions or as services performed by an insurance agent related to insurance transactions (VATA 1994 Sch 9 group 2). HMRC disagreed and held they were liable to VAT.

The First-tier Tribunal agreed with HMRC so the taxpayer appealed. It said its transactions amounted to the cancellation of PPI which was in itself an insurance transaction.

The Upper Tribunal agreeing with the First-tier Tribunal said the economic purpose and commercial reality of the supplies of claiming compensation for mis-sold PPI. This was not...

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