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HMRC internal manual

VAT Insurance

Insurance with other goods and services: value shifting: tribunal - Courts plc

In the Tribunal case of Courts plc (VDT 18746) the furniture retailer was discounting the price of furniture by the price of product guarantee insurance. Because of the way the insurance was offered in the early days of the scheme the Tribunal found that the customers could not and did not enter into contracts of insurance with the insurer and were therefore receiving a single, taxable supply of furniture. Changes were made to the sales documentation at a later stage such that the Tribunal found that during the later period the customer was receiving two supplies, one of furniture from Courts and one of insurance from the insurer. However, the Tribunal considered that although there was a separate supply of insurance to the customer it was overvalued for VAT purposes.

HMRC and Courts were invited to review and agree the percentage of the selling price which was properly attributable for VAT purposes to the insurance charge. This review was never carried out, as Courts Plc went into administration shortly after the release of the decision.

If you come across other such cases please send details to Deductions & Financial Services team.