What is insurance for the purposes of the exemption?: block policyholders
The ECJ in CPP (see VATINS7010) found that:
… the expression ‘insurance transactions’ is broad enough in principle to include the provision of insurance cover by a taxable person who is not himself an insurer but, in the context of a block policy, procures such cover for his customers by making use of the supplies of an insurer who assumes the risk insured.
As a consequence of this ruling, we accept that for VAT purposes the services of block policyholders procuring insurance cover on behalf of their customers are insurance transactions and, as such, fall within the exemption at item 1 of Group 2. A detailed definition of what is meant by the term ‘block policy’ can be found in VATINS1230 and VAT Notice 701/36: Insurance.
It is important to note, however, that this does not necessarily mean that supplies that are exempt were previously regarded as taxable. Prior to the CPP decision we saw block policyholders as intermediaries and their insurance services as qualifying for exemption under item 4 as related services.
It does mean, however, that block policyholders are now seen as principals rather than agents in the provision of insurance and this does have supply implications which are considered further in VATINS7300.
It also means that all the insurance income (including the amount due to the insurer as net premium) will be the block policyholder’s income for the purposes of their partial exemption calculations.
The CPP ruling in respect of block policyholders applied to a specific form of insurance arrangement and should not be applied more widely.