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TMI Blog2001 (1) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... vided to him. The question on this appeal (which affects a large number of CPP's clients) is whether that payment is wholly liable to Value Added Tax (as the Commissioners contend and as the London VAT Tribunal and the Court of Appeal held) or exempt as constituting the making of insurance arrangements for the carrying on of insurance business (as CPP contends), or partly liable since some of the services are and some are not exempt (as Popplewell J held.) The question has to be decided in the light of answers given by the European Court of Justice to questions referred by your Lordships' House pursuant to article 177 (now 234) of the European Community Treaty. 2 The parties are agreed that the Card Protection Plan operated by CPP is, as found by the Tribunal, "intended to ensure that a person who has paid the appropriate fee suffers as little financial loss or inconvenience as possible if credit cards or certain other types of property (e g car keys, passports, share certificates, insurance policies) belonging to him are stolen or lost." When a person applies to join the scheme and his application is accepted, he receives a "policy pack" with a regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. An interest free advance repayment within 14 days. 10.. Lost Luggage Recovery--with CPP stickers lost luggage and other personal property such as briefcase or handbag can be quickly identified and owners advised of its location. Our special insurance cover entitles you to claim up to £25 on communications costs incurred arranging recovery of keys or luggage protected by CPP tags and stickers. This includes phone calls, correspondence, postage, etc., but not travel costs. 11.. Emergency Medical Cover Worldwide--in the event of illness or an accident abroad you need professional help, fast. We provide 24 hour emergency cover and one phone call secures medical advice and assistance in English and other languages, anywhere in the world. If necessary, at your expense, a full consultation, and even medical repatriation by air--with all necessary specialist personnel--can be arranged for you. 12.. Emergency Airline Ticket--if your credit cards and cash are lost or stolen and you're stranded overseas, CPP's travel cover means arrangements can be made, upon approval, to issue an air ticket to get you home. Cost repayable within 14 days. 13.. Computer Update Services-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dom where it is "a taxable supply made by a taxable person in the course or furtherance of any business carried on by him", other than an exempt supply: section 2(1) and section 2(2) of the 1983 Act. 6 Article 13(B) of the Sixth Directive provides: "Without prejudice to other Community provisions, member states shall exempt the following under conditions which they shall lay down for the purpose of insuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse: (a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents . . . " 7 Pursuant to that obligation section 17(1) of the 1983 Act provided: "A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 6 to this Act ". At the time of the commissioners' decision (23 February 1990) Schedule 6 included: "Group 2--Insurance. Item No. 1. The provision of insurance and reinsurance by--(a) a person permitted, in accordance with section 2 of the Insurance Companies Act 1982, to carry on insurance busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion A indemnified the cardholder against unlimited loss (subject to a limit during the first 24 hours): "that indemnity is an indemnity covering the cardholder. It is not an indemnity given to the company against a claim by the cardholder . . . . There is scarcely any part of the policy which gives [CPP] any right against the insurance company." He rejected the argument that there was no privity of contract between the cardholder and Continental so there could be no exemption. Arrangements for the provision of insurance enforceable by the cardholder could still be made by CPP. 12 The judge concluded, at p 807, that there was in the protection plan the making of arrangements for the provision of insurance within Schedule 6 to the 1983 Act. The "convenience" services were however "a separate part of the plan unrelated to the insurance". There were thus two supplies and it was necessary to decide which was the major supply. 13 The Court of Appeal [1994] STC 199 dismissed CPP's appeal contending that there was a single supply of insurance. On the contrary the court found that there was a single supply of a card registration service to which the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding related services performed by insurance . . . agents' within the meaning of article 13(B)(a) of the Sixth VAT Directive? In particular, for the purpose of answering that question: (a) does 'insurance' within the meaning of article 13(B)(a) of the Sixth VAT Directive include the classes of activity, in particular 'assistance' activity, listed in the annex to Council Directive (73/239/ EEC) (the First Council Directive on non-life insurance), as amended by Council Directive (84/641/EEC)? (b) do the 'related services of . . . insurance agents' in article 13(B)(a) of the Sixth VAT Directive constitute or include the activities referred to in article 2 of Council Directive (77/92/E.E.C.)? (4) Is it compatible with article 13(B)(a) of the Sixth VAT Directive for a member state to restrict the scope of the exemption for 'insurance . . . transactions' to supplies made by persons permitted to carry on insurance business under the law of that member state?" The court in its judgment (Case C-349/96) [1999] 2 AC 601, 621 et seq) noted that "insurance transactions" and the concept of insurance are not defined either in the Sixth VAT Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount: "29. . . . first, that it follows from article 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, secondly, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service. 30.. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied: Customs and Excise Commissioners v. Madgett and Baldwin (trading as Howden Court Hotel) (Joined Cases C-308/96 and 94/97) [1998] STC 1189, 1206, para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on this question, and was supported by the Court of Appeal, its seems to me that it is open as a matter of law for your Lordships to review afresh the scheme although in doing so I pay full regard to the views of the courts below. 22 It is clear from the Court of Justice's judgment that the national court's task is to have regard to the "essential features of the transaction" to see whether it is "several distinct principal services" or a single service and that what from an economic point of view is in reality a single service should not be "artificially split". It seems that an overall view should be taken and over-zealous dissecting and analysis of particular clauses should be avoided. 23 I accept that it is possible, as Mr. Paines has contended, to find that some of the 15 points if separated out and seen in isolation do not on the face of it provide for insurance as commonly understood. For example, point 1 provides only for an accurate computer record; point 6 provides for a change of address service; point 13 provides for a computer update service. 24 But there are points which indisputably provide for insurance of the most obvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services which are not independently to be categorised as insurance they are in my view ancillary and in some cases minor features of the plan. They were, as CPP contends, preconditions to the client making a claim for cash indemnity or assistance or a precondition of the furnishing of insurance cover. I doubt whether they can in any event be regarded as sufficiently coherent as to be treated as one separate supply but even if they can it is ancillary to the provision of insurance. To regard the provision of insurance as ancillary or subsidiary to the registration of credit card numbers is unreal and the consequences for the client of being able to take protective action with CPP with whom the cards are registered is closely linked to the insurance service. It is not possible to say that some elements of the transaction are "economically dissociable" from the others: Commission of the European Communities v. United Kingdom of Great Britain and Northern Ireland (Case 353/85) [1988] ECR 817. 29 I would therefore hold in response to paragraph 32 of the Court of Justice's judgment [1999] 2 AC 621, 627 that the transaction performed by CPP for Dr. Howell is to be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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