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Intelligent Money Ltd V Hm Revenue & Customs [2023] UKUT 00236 (TCC), 26 September 2023.
The Upper Tribunal (Tax and Chancery Chamber), Mr Justice Rajah and Judge Ashley Greenbank, has dismissed Intelligent Money’s (“IML”) claim that fees it received in connection with the provision, operation and administration of self-invested personal pension schemes (SIPPs) were consideration for exempt supplies of “insurance transactions” within the meaning of Group 2 of Schedule 9 to the Value Added Tax Act 1994 (“the Insurance Exemption”). The Upper Tribunal upheld the decision of the First-tier Tribunal, [2022] UKFTT 0338 (TC), albeit for reasons that differed in some respects.
A SIPP is a tax-efficient means whereby individuals may save for their retirement, set up and operated in accordance with the provisions of the Finance Act 2004 and the Pensions Act 2008. A SIPP member’s investments are held on trust and administered by the SIPP trustee and operator. The member is solely responsible for all decisions relating to the purchase, retention and sale of all investments within the SIPP. The value of the SIPP may only be applied to provide benefits in accordance with the scheme rules, which include (1) payments to the member on reaching retirement age and/or (2) payments to his or her nominees on death, pursuant to a tax-efficient discretionary trust structure.
The UT held that IML’s administration services did not involve any assumption of risk to the member and did not meet the necessary conditions for an “insurance transaction”, in accordance with the consistent case law of the CJEU, starting from Card Protection Plan Ltd v. CEC (Case C-349/96) and including United Biscuits (Pension Trustees) Ltd v RCC (Case C-235/19). IML’s services lacked the essential feature of an “insurance transaction”, namely that, under the contractual relationship between the insured and the insurer, the insured obtains some protection from a relevant risk or uncertainty; someone other than the insured must bear the cost of the payment or the provision of the service that is provided on the materialization of that risk or uncertainty. Under the trust arrangements of the SIPP, the provision of “life” and “death” benefits fell exclusively on the SIPP member, through the member’s accumulated fund, in which IML had no beneficial interest. For that reason, the UT, disagreeing with the FTT, considered that the SIPP was not a contract of insurance as a matter of domestic law. The UT further held that the pre-CPP decision of a VAT & duties tribunal in Winterthur Life UK Ltd v. CEC [1997] Lexis Citation 1166 was wrongly decided.
The UT further considered (obiter) that the fees paid by the member to IML were not “premiums”; they were not paid “in advance” for a benefit that may or may not arise, but were payments made after the event or for ongoing administrative services. Members’ contributions to their funds were not consideration for anything, but were held by IML on trust. The life and death benefits provided to the members, their dependants or other beneficiaries were paid out of the members’ own funds in which IML had no beneficial interest, by IML qua trustee under the powers and duties conferred by the trust deed and scheme rules; it was wrong to equate those powers e duties as a contractual obligation to provide benefits.
Andrew Macnab acted for HMRC.
Read the Upper Tribunal’s decision here.
Read the FTT’s decision here.