Intelligent Money Limited v The Commissioners for HMRC

This is an appeal by the appellant, Intelligent Money Limited (“IML”), against a decision of the First-tier Tribunal (the “FTT”) dated 5 May 2022 with neutral citation [2022] UKFTT 0338 (TC) (the “FTT Decision”) dismissing a claim by IML for repayment of VAT overpaid. The respondents are the Commissioners for His Majesty’s Revenue and Customs (“HMRC”).

The appeal concerns the liability to VAT of services provided by IML in connection with the provision, operation and administration of self-invested personal pension schemes (“SIPPs”), and, in particular whether those supplies fall within the exemption from VAT for “insurance and reinsurance transactions” contained in item 1 Group 2 Schedule 9 to the Value Added Tax Act 1994 (“VATA”).

Item 1 Group 2 Schedule 9 VATA implements article 135(1)(a) of Council Directive 2006/112/EC (referred to as the “Principal VAT Directive” (“PVD”)), which provides for the exemption of “insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents”. It is no part of either party’s case that the provisions of Group 2 Schedule 9 VATA do not properly implement article 135(1)(a) PVD. We have referred to the exemption from VAT provided by item 1 Group 2 Schedule 9 VATA and article 135(1)(a) PVD as the “insurance exemption” in this decision.

The FTT decided that the services provided by IML did not fall within the insurance exemption and dismissed IML’s appeal. IML appeals to this tribunal with the permission of the FTT.

The facts are not in dispute. They were set out by the FTT at paragraphs [7] to [36] of the FTT Decision. We gratefully adopt the FTT’s summary, which we have set out below.

Having set out the facts, the FTT referred to the legislative background including: article 135(1)(a) PVD, Group 2 Schedule 9 VATA, Council Directive 2009/138/EC (the “Solvency II Directive”), the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the Pensions Act 2008 and the Finance Act 2004.

The FTT then embarked upon a summary of the relevant case law. It began with the UK case law concerning the meaning of “insurance” in various contexts. In this respect, the FTT referred to the cases of Prudential Insurance Co v. Inland Revenue Commissioners [1904] 2 KB 658 (“Prudential”), a stamp duty case, and Fuji Finance Inc. v. Aetna Life Insurance Co. Limited [1997] Ch 173 (“Fuji”), on the application of the Life Assurance Act 1774, as well as the cases of Gould v. Curtis [1913] 3 KB 84 (“Gould”) and Medical Defence Union v. Department of Trade [1980] Ch 82 (FTT [43]-[55]).

In the course of that review, the FTT identified the key features of an insurance contract as set out by Channell J in Prudential (at p663) as being:

The FTT noted the developments in that test most notably, in Gould, where the Court of Appeal found that, whilst an adverse event is commonly present in the context of insurance, an insurable interest may be established without the requirement of adversity particularly in the case of “contingency insurance” which provides for a payment on the occurrence a contingent event (as opposed to “indemnity insurance” which provides an indemnity against loss) (FTT [46]); and, in Fuji, where the Court of Appeal held that a short-term investment contract, under which a sum calculated by reference to the price of units currently allocated to the policy was payable on the death of the life assured or on its earlier surrender, was a contract of life insurance because the necessary requirement of “uncertainty” was present in that the timing of each of the potential circumstances in which a benefit was payable was uncertain (FTT [53]).

We have referred to the test in Prudential as developed through the UK case law as the “Prudential test” in the remainder of this decision notice.

The FTT also reviewed the case law relating to the VAT exemption, beginning with the VAT & Duties Tribunal case of Winterthur Life UK Limited v. Customs & Excise Commissioners [1997] Lexis Citation 1166 (“Winterthur”) before turning to the decisions of the Court of Justice of the European Union (and its predecessor the European Court of Justice) (“CJEU”) on the meaning of “insurance transactions” for the purposes of article 135(1)(a) PVD (and its predecessor article 13(B)(a) of Council Directive 77/338/EEC or the “Sixth Directive”) being Card Protection Plan Limited v. Customs & Excise Commissioners (Case C-349/96) (“CPP”), Directeur General des Finances Publiques v. Mapfre (Case C-584/13) (“Mapfre”), Minister Finansow v. Aspiro SA (Case C-40/15) (“Aspiro”), and United Biscuits (Pension Trustees) Limited v. HMRC (Case C-235/19) (“United Biscuits”) (FTT [56]-[82]).

We will return to this case law later in this decision notice. For present purposes, it is sufficient to note that the FTT identified that the criteria for a transaction to be treated as an “insurance transaction” for the purposes of the insurance exemption are consistently stated in the CJEU case law as being “that the insurer undertakes in return for prior payment of the premium, to provide the insured, in the event of materialization of the risk covered, with a service agreed when the contract was concluded” (FTT [78], citing the CJEU decision in United Biscuits [30]).

Having set out the parties’ submissions in some detail, the FTT addressed the question of whether or not the SIPP operated by IML (the “IM SIPP”) was a contract of insurance for the purpose of the Prudential test. It dealt with this issue first, before addressing whether or not the provision of the IM SIPP should be regarded as an “insurance transaction” for VAT purposes for two reasons:

The FTT concluded that the IM SIPP was a contract of insurance within the Prudential test. In summary, this was on the basis that no relevant distinction could be made between the arrangements in Fuji and the IM SIPP. In particular, no distinction should be made on the grounds that the premiums became legally and beneficially owned by the insurance company, in the Fuji case, whereas the contributions were held under the trust arrangements, in the case of the IM SIPP, and so remained “substantively the members’ own funds” (FTT [118]-[120]).

The FTT then turned to the question of whether the IM SIPP was an insurance transaction for the purposes of the insurance exemption. It undertook its analysis by reference to whether or not there was a material difference between the test as set out in the CJEU case law and the Prudential test.

The FTT’s reasoning was, in summary, as follows:

On that basis, the FTT decided that the fees payable by the members of the IM SIPP were not consideration for an exempt “insurance transaction” and dismissed IML’s claims for repayment of overpaid tax (FTT [145]).

The FTT accepted that its decision was contrary to the decision of the VAT & Duties Tribunal in Winterthur (FTT [143]). We will return to the decision in that case and the other case law later in this decision.

The FTT granted IML permission to appeal on four grounds. They were, in summary:

Before us, Mr Bedenham acknowledged that the core issue underlying the first two grounds was whether the FTT erred in its interpretation of what constitutes an “insurance transaction” for the purpose of the insurance exemption, and thereby erred in finding that IML’s supplies did not fall within the exemption. Mr Bedenham also accepted that the third and fourth grounds were not standalone grounds of appeal, and the tribunal does not need to address them separately. We have proceeded on that basis.

We will address the parties’ submissions in greater detail in our discussion of the issues. However, it will assist our explanation if we first set out briefly the parties’ respective positions.

Mr Bedenham, for IML, makes the following points.

Mr Macnab, for HMRC, supports the conclusion of the FTT, but not of all of its reasoning. He makes the following points:

We have set out the terms of the insurance exemption in both article 135(1)(a) PVD and Group 2 Schedule 9 VATA at [2] and [3] above. There was no argument between the parties that the UK legislation did not properly implement the provisions of the PVD.

Both IML and HMRC agreed that the real issue in this appeal is what criteria have been set down by the CJEU for the purpose of the insurance exemption and whether the IM SIPP meets those criteria. We therefore propose to begin our discussion of the relevant principles by reference to the criteria established by the CJEU in its decisions. We will comment on the domestic case law later in this decision.

We will begin with the four key decisions of the CJEU concerning the interpretation of the insurance exemption, on which the FTT relied in its decision: CPP, Mapfre, Aspiro, and United Biscuits.

The first such case is CPP. In that case, CPP offered holders of credit cards, on payment of a certain sum, a plan intended to protect them against financial loss and inconvenience resulting from the loss or theft of their cards or of certain other items such as car keys, passports and insurance documents. In so far as the plan provided for compensation to the cardholder against financial loss in the event of loss or theft, CPP obtained block cover from an insurance company under a policy arranged by an insurance broker instructed by CPP.

At CPP [17], quoting from the Advocate General’s opinion, the CJEU set out the essential features of an “insurance transaction” in the following terms:

These essential features are repeated consistently in the later cases (see Mapfre [28], Aspiro [22], United Biscuits [30]). The CJEU decided that the service provided by CPP to its customers was capable of meeting the essential requirements and so being treated as an “insurance transaction” within article 13(B)(a) of the Sixth Directive.

The other key points that we take from the CJEU’s decision in CPP are as follows.

The next case to which we should refer is Mapfre. The case concerned the VAT treatment of warranties provided by Mapfre to purchasers of second-hand motor vehicles from certain dealers covering the repair of the vehicles in the case of mechanical breakdowns.

Having set out the essential features of an “insurance transaction” in similar terms to its decision in CPP [17] (Mapfre [28]), the CJEU records that:

The CJEU found that the transaction in the Mapfre case was capable of meeting all the essential criteria of an “insurance transaction”. The CJEU says this at Mapfre [39]:

The CJEU also identified, at Mapfre [42], what it regarded as the essence of an “insurance transaction” - namely the payment of a premium by the insured person in return for the removal of the risk of bearing an uncertain financial loss – in the following terms:

It is the above passage on which the FTT particularly relies in support of its conclusion that an “insurance transaction” must involve the exemption of the insured party from a risk of bearing financial loss.

The third case is Aspiro. That case involved a company, Aspiro, that supplied claims settlement services under contractual arrangements with insurance companies, without itself incurring any liability to the insured persons. The CJEU decided that, even if these services might form part of an insurance transaction, they did not fall to be treated as “insurance transactions” within the insurance exemption when separated from the related provision of insurance cover.

Before we turn to the decision of the CJEU in this case, we will refer first to various aspects of the opinion of the Advocate General, Advocate General Kokott.

Advocate General Kokott points out in her opinion that a contractual relationship between the provider of the insurance service and the insured person and the assumption of risk are essential elements of an insurance transaction. She says this at paragraph [22] of her opinion (Footnote: ²):

In this case, Aspiro did not undertake to cover risks nor was it in a contractual relationship with the insured person.

Furthermore, the insurance exemption could not extend to transactions, which might form part of an insurance transaction, but did not include the assumption of risk. She says this (Aspiro AG [26]):

This is the first reference, in the cases to which we have been referred, to the concept of insurance “in the strict sense” to refer to a transaction that involves an assumption of risk (and to which the FTT refers at FTT [134] and FTT [136]).

The CJEU appears to follow this approach, but without reference to any concept of insurance “in the strict sense”. Having repeated the essentials of an insurance transaction as set out in CPP (Aspiro [22]), the CJEU says this (at Aspiro [23] and [24]):

The final decision of the CJEU to which the FTT referred is United Biscuits. That case concerned the VAT treatment of investment management services provided to managers of pension funds by investment managers that were not insurance companies.

We should refer once again to the opinion of the Advocate General, in this case Advocate General Pikamae, as it features prominently in the FTT Decision.

In its decision, the CJEU adopts this rationale and finds that the services provided under the contractual arrangements in United Biscuits were not insurance transactions. This was because the insurance exemption was justified by the difficulty of determining the correct amount of VAT on insurance premiums relating to the coverage of risk. The services in question were fund management services, which did not involve any element of protection from risk. The CJEU says this (at United Biscuits [31] and [32]):

No other relevant criteria relevant to the concept of “insurance transactions” could be derived from the CJEU case law regarding the meaning of “insurance” in the EU insurance directives. The previous decisions of the CJEU (including CPP [18]) should not be read as confirming that services treated as “insurance” within the EU insurance directives should be regarded as “insurance transactions” for the purpose of article 135(1)(a) PVD (United Biscuits [33]-[51]).

On that basis, the CJEU held that investment fund management services, which did not provide any indemnity from risk, could not be classified as “insurance transactions”, within the meaning of article 135(1)(a) PVD and so did not qualify for exemption (United Biscuits [52]).

We have also been referred by the parties to two more recent decisions of the CJEU: Q-GmbH v Finanzamt Z (Case C-907/19) (“Q-GmbH”) and Generali Seguros SA v Autoridade Tributaria e Aduaneira (Case C-42/22) (“Generali”). For the most part, these two cases confirm the principles derived from the earlier case law.

Q-GmbH concerned the VAT treatment of three types of supplies: (i) the development and supply of insurance products by Q-GmbH to an insurer, (ii) the placement of those insurance products for the insurer (where the insurance contract was then entered into between the insurer and the policyholder), and (iii) the management of insurance contracts and the settlement of claims. Having reiterated the principles established in other cases, the CJEU found that the supplies made by Q-GmbH did not fall within the insurance exemption because there was no contractual relationship to which it was a party under which risks of another party were covered. The CJEU says this (at Q-GmbH [33]):

Generali concerned the purchase by an insurance company from its motor insurance customers of parts from motor vehicles that had been written-off and the sale of those parts by the insurance company. The CJEU reiterated the objective of the insurance exemption (Generali [32]) and the essential features of an insurance transaction (Generali [33]) from the earlier cases. It found that these transactions did not fall within the insurance exemption because even though the transactions were undertaken by the insurance company they were under separate arrangements from the provision of insurance. The CJEU says this (at Generali [35]-[37]):

The decision in Generali was issued after IP completion day (as defined for the purposes of the European Union (Withdrawal) Act 2018) and so is not binding upon this tribunal. However, the tribunal may have regard to the decision so far as it is relevant to the matters before tribunal.

The principles that we derive from our review of the CJEU case law are, in summary, as follows:

As we have mentioned above, to some extent, Mr Bedenham relies on domestic non-VAT case law in support of his position. He does not dispute that, in determining whether a supply is an “insurance transaction” within the insurance exemption, the decisions of the CJEU must be applied. There is ample authority to support the view that the exemptions from VAT contained within the PVD contain autonomous concepts of EU law which must be given a consistent meaning (see for example CPP [15]).

On that basis, the decisions of domestic courts on the meaning of “insurance” outside the context of the insurance exemption from VAT are strictly not relevant. However, Mr Bedenham says that reference to the domestic case law can be instructive and assist the interpretation of the relevant VAT provisions. Furthermore, he says, the factors that have to be taken into account in determining whether a supply is an “insurance transaction” for the purpose of the insurance exemption are essentially the same as those that apply when determining whether a contract is, as a matter of domestic law, a contract of insurance.

We have set out above, in our summary of the FTT Decision, the facts and key points arising from the Prudential case. In that case, Channell J identified the criteria for determining whether the given contract was a contract of insurance for stamp duty purposes. Those criteria formed the basis of the Prudential test. They were expanded upon by the Court of Appeal in Gould, where the Court of Appeal decided that an insurance contract could encompass provision for payment on an uncertain contingent event and did not require the event to be adverse to the insured person.

The next case to which we should refer is Fuji. Once again, we have set out the facts briefly above, but, in summary, the case concerned the treatment of a capital investment bond under the terms of which the amount subscribed was notionally allocated to certain investment funds and life and death benefits were payable by reference to the value of the units in the funds. The allocation of the subscription price to the funds was, however, only notional; the funds remained the property of the life insurance company. On that basis, the Court of Appeal found that the investment bond was a form of life insurance. Morritt LJ – relying on the decisions of the Court of Appeal in New Zealand in Marac Life Assurance Limited v Commissioner of Inland Revenue [1986] 1 NZLR 694 and the Federal Court of Australia in N M Superannuation Pty Limited v Young 113 ALR 39 – found that there was sufficient uncertainty in the payment under the contract for the contract to be regarded as one of life insurance as the payments were contingent upon death, the timing of which was uncertain, or reaching a given age, the attainment of which was uncertain (p185E – p186C, p186H – p187F). It did not matter that the insurer was not exposed to any financial risk (p189B). Hobhouse LJ agreed (p198C-F).

The decisions in Prudential and Fuji were not made in the context of the insurance exemption from VAT. The one domestic decision to which we have been referred in relation to the insurance exemption is Winterthur. This was a case before the VAT & Duties Tribunal. The case concerned the payment of fund management fees charged by two subsidiaries of a life insurance company, which acted as the trustee of two pension schemes under which the members of the schemes had control and management of the funds representing their and their employers’ contributions.

The tribunal found that the schemes were capable of being treated as life insurance contracts by reference to the Court of Appeal decision in Fuji to which we have referred above, and, on that basis, the payment of the management fees fell within the insurance exemption. In doing so, the tribunal dismissed an argument on behalf of HMRC that there was no contract of insurance between the members and the life company to provide the relevant benefits. The tribunal reached this conclusion on the basis that the arrangement as a whole could be read as importing that obligation.

The tribunal also found that contributions paid by the members to the funds could be regarded as consideration paid for the benefits provided under the scheme even though, for the most part, the contributions were made to a fund held on behalf of the member and his or her dependents. The tribunal justified this conclusion on the grounds that the contributions could also be used to pay the administrative expenses of the scheme. The tribunal said this:

The parties agree that the relevant criteria for determining whether the arrangements in this case involve “insurance transactions” are those set out by the CJEU in CPP and the other cases to which we have referred. For ease of reference, those essential features are that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of the materialization of the risk covered, with the service agreed when the contract was concluded. There are no other relevant criteria.

We have heard submissions from the parties on various specific aspects of this definition including: whether the arrangements involve the prior payment of a premium; whether the insurer (IML) undertakes to provide the member with a relevant service agreed when the contract was concluded; and whether the arrangements involve the materialization of a risk. However, the central issue between the parties is whether it is implicit in this definition that the insurer will assume an element of risk and, if so, what is the nature of “risk” in this context. That issue encompasses many of the more detailed submissions that have been made by the parties and so we will address it first, before commenting on two specific aspects, whether the arrangements involve the prior payment of a premium, and the nature of the service provided by IML under the arrangements.

As we have mentioned in our summary of the case law above, the CJEU consistently refers to an insurance transaction as involving the assumption of risk or the coverage of risk (see [52(4)] above). This requirement is expressed in various ways, for example, the CJEU refers in some cases to the insured person being “exempted” from risk (for example, Mapfre [42]) or the insured person being provided with an “indemnity from risk” (United Biscuits [31]) or the insured person being “covered” in respect of a risk (Aspiro [24]). The references in the opinions of the Advocates General in Aspiro and United Biscuits to insurance “in the strict sense” are coupled with references to the “assumption of risk” as being the essence of an insurance transaction that falls within the insurance exemption (Aspiro AG [26], United Biscuits AG [41], and AG [68]).

Some of the references in the CJEU case law might be regarded as going further in suggesting that an insurance transaction must involve protection against a risk of bearing “financial loss”. These references appear, for example, in the CJEU decision in Mapfre (Mapfre [42]), which is cited in the Advocate General’s opinion in United Biscuits (United Biscuits AG [40]). This requirement does not, however, consistently appear – it is not, for example, repeated in the CJEU decision in United Biscuits – and, in Mapfre, the limitation did not have any bearing on the outcome of the case.

The FTT concluded that the effect of the CJEU decisions was that it was a requirement of an insurance transaction that the insurer must assume a financial risk (FTT [137]). Mr Bedenham submits that that conclusion was wrong. He says that the assumption of risk by the insurer is not an essential feature of an insurance transaction; all that is required is that the provider of the insurance service undertakes to make a payment or provide a service on the materialization of a “risk”. By its decision, the FTT imported an additional feature, which is not one of the essential features of an insurance transaction as set out in the CJEU case law.

As regards the meaning of “risk” in this context, some of the language in the judgments of the CJEU might be taken to suggest that the insurance exemption is limited to cases involving an uncertain event that is adverse to the insured person. That is particularly so for those cases that refer to protections against “financial loss”. If that were the case, the exemption might be restricted to “indemnity insurance”, which provides compensation for a given loss of the insured person, and not extend to “contingency insurance”, which provides for a payment on a contingent event. If that were the case, the insurance exemption would not extend to the provision of many forms of life insurance (and not just those that are investment-based as the FTT suggests at FTT [137]).

Mr Bedenham submits that that conclusion cannot be correct; the insurance exemption must extend to life insurance contracts including those that perform an investment function such as that in Fuji. On his submission, the reference to a “risk” in the CJEU’s classic formulation of the essential features of an insurance transaction must be taken to mean simply a contingent “trigger event” for the payment or service in question. That event must be uncertain in that either the occurrence of the event itself must be uncertain or the timing of the event must be uncertain, but that is sufficient to meet the requirement for “risk”. Mr Bedenham relies upon the domestic case law in support of this submission and, in particular, Fuji.

As we have described above, following the decision in Gould, the domestic case law meaning of “insurance” under the Prudential test can extend to agreements under which an insurer makes a payment or provides a service on the occurrence of an uncertain event that is not necessarily adverse to the insured (and so can extend to life insurance contracts, including those with an investment element, such as that in Fuji). The CJEU case law relating to the insurance exemption from VAT does not address that issue. There is no CJEU decision on the application of the insurance exemption to life insurance contracts. If we had to decide the point, it seems to us that the rationale for the insurance exemption as described in the opinions of the Advocates General in CPP and United Biscuits (CPP AG [26] and United Biscuits AG [66] and footnote 54) and in the decision of the CJEU in United Biscuits (United Biscuits [32]) is capable of applying to at least some forms life insurance contract and possibly some forms of life insurance that involve an investment element. However, for the reasons that we give below, it is not necessary for us to reach a conclusion on that issue for the purpose of our decision on this appeal, and we do not do so.

Even if we accept that the concept of “risk” may extend to uncertain contingent events which may not be strictly adverse to the insured person, the more important question for the purpose of this appeal is whether it is implicit in the essential features of an insurance transaction as set out by the CJEU that a person other than the insured person bears the cost of the materialization of the relevant risk or uncertainty.

The FTT decided that it was. The FTT (at FTT [137]) refers to the need for the insurer “to assume a financial risk” for a transaction to be an insurance transaction for the purpose of the insurance exemption. At best, we suspect that the FTT’s statement slightly overstates the position. Even if it is an implicit requirement of an insurance transaction that a person other than the insured person bears the relevant risk or uncertainty, it is clear from the CJEU case law that it is not a requirement that the insurance service provider (i.e. the party to the contract with the insured person) ultimately bears the risk that is being covered. The risk may be borne by another person (see, for example, CPP [18] and Aspiro AG [22]).

In any event, Mr Bedenham submits that there is no such requirement and that by introducing this criterion the FTT erred in law by impermissibly adding to the essential features of an insurance transaction as prescribed by the CJEU. By reference to the domestic case law and the CJEU decision in Angel Lorenzo Gonzalez Alonso v Nationale Nederlanden Vida Cia De Seguros y Reasegouros SAE (Case C-166/11), he argues that it is not a necessary feature of an “insurance transaction” that the insurer (or a person other than the insured person) bears a financial risk.

We disagree with Mr Bedenham on this issue. Even if we accept for present purposes that the concept of “risk” may extend to an uncertain contingent event, in our view, it is a necessary implication of the essential features of an “insurance transaction” as expressed by the CJEU that, under the contractual relationship between the insured person and the insurance service provider, the insured person obtains some protection from the relevant risk or uncertainty. Under the arrangements as whole, the provider of the insurance service to the insured person may pass on the cost of providing that protection to another person (see CPP [18] and Aspiro [22]). But someone other than the insured person must bear the cost of the payment or the provision of the service that is provided on the materialization of that risk or uncertainty. Our reasons are set out below.

We acknowledge that the effect of our conclusion is that – even if the insurance exemption can extend to some life insurance contracts with an investment element – a distinction has to be made between cases (such as Fuji) where the premiums become owned by the insurance company and the cost of the payment benefits is made out of the insurance company’s own resources (even if the amount payable is notionally determined by reference to the value of underlying investments) and a case in which the premiums remain substantially owned by the insured person and the benefits are paid out of funds held substantially for the benefit of the insured person and/or other beneficiaries.

The pension arrangements, in this case, where the cost of the life and death benefits provided to the member is borne by a member’s own fund, fall within the latter category and outside the scope of the insurance exemption. We note that, in Winterthur, on similar facts to the present case, the tribunal came to the alternative conclusion largely because it took the view that the necessary obligation to make provide the life and death benefits could be found in the trust arrangements. Winterthur was, of course, decided some time before even the earliest of the CJEU cases to which we have referred (CPP) and accordingly the tribunal did not refer to the essential features of an insurance transaction as established in those cases. In our view, Winterthur is wrongly decided. If Winterthur was before us today, we would reach a different conclusion.

It follows that, although our reasoning may differ on some aspects, in broad terms, we agree with the FTT’s conclusions at FTT [141].

That conclusion is sufficient to dismiss this appeal. However, we will comment briefly on two related issues on which we heard argument from the parties.

The first is whether any payment made by the members of the IM SIPP can be regarded as a “premium”.

The essential features of an insurance transaction as specified by the CJEU require the “prior payment of a premium”. The CJEU case law does not focus materially on the meaning of a “premium” but rather on the assumption of risk (to which we have referred above). However, various points can be made from the case law:

In the present case, Mr Bedenham says that the annual fees paid under the scheme rules and, to an extent, the contributions made by members constitute “premiums” for this purpose paid for the provision of the life and death benefits under the scheme. Mr Macnab says that none of the payments represents a premium. The contributions to the IM SIPP made by members are not consideration for any supply. The other payments and charges are paid for the list of services set out in clause 18 of the terms and conditions. They are not paid in advance. Annual fees are paid for the operation of the scheme as set out in the fee schedule; they are not paid for the provision of the life and death benefits under the scheme.

On this issue we agree with Mr Macnab.

The majority of the fees in the fee schedule are not paid “in advance” for a benefit that may or may not arise. They are paid either by the hour or as a fixed fee following the event in question. There are certain fees in the schedule that are paid in advance – in particular, the annual fees for the establishment and operation of the plan and the annual fees relating to property management and letting – but these are fees for specific ongoing administrative services provided to the member. They do not relate to the risk or contingency being, on Mr Bedenham’s case, the payment of the life or death benefits, and so cannot be regarded as “premiums”. The difficulty of charging VAT in relation to these amounts as described in United Biscuits [32] does not arise.

As regards the contributions made by the members to the fund, Mr Bedenham says that, at least in part, these contributions are made in return for the provision of benefits. In our view, the contributions to the fund cannot be consideration for any supply made by IML. All of the supplies made by IML under the arrangements are made in consideration for the various fees set out in the fee schedule. The contributions are made by the members to IML on the terms of the trust scheme and held by IML on the terms of the trust and the scheme rules. IML is not beneficially entitled to the contributions. They are invested under the terms of the scheme rules for the benefit of the member, his or her dependants and/or other beneficiaries.

Mr Bedenham points to the fact that there is provision in the terms and conditions of the IM SIPP which enables IML, as trustee, to sell investments to pay charges and fees. However, to our minds, it does not follow from the inclusion of that provision in the terms and conditions that the contributions are being made in return for the contingent payment of the life and death benefits or that the fees which are discharged from the funds are being applied in return for the contingent payments of the life and death benefits. The provision simply enables amounts that are beneficially owned by a member to be used to pay the charges and fees that are consideration for other services for VAT purposes.

The second issue relates to the nature of the service provided under the contract.

As we have mentioned, on IML’s case, the service that it provided at the conclusion of the contract is the provision of the life and death benefits under the IM SIPP. Mr Macnab says that the life and death benefits cannot be the provision of the relevant service. The life and death benefits are provided to the members, their dependants, or other beneficiaries out of the members’ own funds in which IML has no beneficial interest. It is wrong to equate the duties and powers of IML under the trust deed and the scheme rules as a contractual obligation to provide benefits.

We also agree with Mr Macnab on this point. It seems to us that the only benefit or service that is being provided to the members (their dependants or other beneficiaries) when the life and death benefits are paid is the administrative service of releasing the funds. There is a separate charge for that service.

We note that in Winterthur, the tribunal found that the provision of pension benefits under the scheme in that case could amount to the provision of benefits under an insurance contract. The tribunal took the view that the trust arrangements could not dictate the VAT treatment and that the arrangements as a whole could be treated as comprising the necessary obligation. As we have mentioned above, Winterthur was decided before the any of the leading CJEU decisions to which we have referred. We would decide Winterthur differently today.

For the reasons that we have given, in our view, the supplies made by IML in connection with the provision of the IM SIPP do not fall within the insurance exemption. Our reasoning differs from that of the FTT on some of the issues, but our conclusion is the same. Any errors of law that the FTT may have made in reaching its decision were not material to the outcome and, on that basis, we will not remake the decision.

We dismiss this appeal.