What is insurance for the purposes of the exemption?: characteristics of insurance
There is no legal definition of insurance and many supplies are called ‘insurance’ when they are in fact something else. For example, a cost could be described on an invoice as insurance but may in fact be a taxable guarantee (see VATINS3700) or may simply be a recharge of costs (see VATINS2600 and VATINS2610).
In the CPP case, (see VATINS7010) the ECJ notes that the concept of insurance is not defined. However the Advocate General’s opinion is referred to where it is stated that:
The essentials of insurance transactions are, as generally understood, that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the services agreed when the contract was concluded.
The ECJ goes on to say that:
It is not essential that the service the insurer has undertaken to provide in the event of loss consists in the payment of a sum of money, as that service may also take the form of the provision of assistance in cash or in kind…there is no reason for the interpretation of the term “insurance” to differ according to whether it appears in the directive on insurance [meaning the First Council Directive 73/239/EEC] or in the Sixth Directive.
The (Collins) dictionary defines insurance as ‘The act, system, or business of providing financial protection against specified contingencies such as death, loss or damage.’
This clearly accords with our daily understanding of what insurance is, and it is likely that any form of insurance would fall within this definition.