A win for insurance intermediaries in VAT recovery case

In the recent case of Hastings Insurance Services Ltd v HMRC [2025] UKFTT 275 (TC), the First-tier Tribunal ruled in favour of Hastings, an insurance intermediary, in relation to its VAT recovery position.

In this article we delve into its ability to recover input tax incurred on its supply of services to non-EU insurers, where those services ultimately benefited policyholders in the UK.

Background

Hastings Insurance Services Ltd (Hastings) is a UK-based insurance intermediary that provides brokering and underwriting support services to Advantage Insurance Company Ltd (Advantage), a Gibraltar-based insurer. The dispute arose when HMRC denied Hastings’ claim for input VAT recovery from 1 January 2019 to 31 December 2022, arguing that Hastings' services ultimately benefited UK policyholders rather than Advantage.

HMRC relied on the Offshore Looping Regulations 2018, which amended the Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (SSO) to prevent VAT recovery where an intermediary supplied services to an offshore insurer that, in turn, insured UK-based customers.

Hastings argued that the amended SSO was incompatible with Article 169(c) of the EU Principal VAT Directive (PVD), which permits VAT recovery on transactions with customers established outside the EU. The FTT considered whether Advantage was the "customer" for the purposes of Article 169(c). Hastings asserted that Advantage, as the direct recipient of its services, was the customer, whereas HMRC argued that the insured policyholders in the UK should be considered the customers. Hastings also argued that Article 169(c) of the PVD had direct effect in UK law pre-Brexit and post-Brexit.

The Decision

The FTT ruled in Hastings’ favour, confirming that Advantage was the customer under Article 169(c) of the PVD. It emphasised that the term "customer" should be interpreted based on its ordinary and natural meaning, referring to the direct recipient of the service rather than the end user. The FTT also confirmed that Hastings can rely on Article 169(c) without the need for further UK legislation as it had direct effect in UK law for the periods concerned.

Accordingly, Hastings retained the right to reclaim input tax on its supplies to Advantage during the disputed periods.

What does this mean for UK insurance companies?

This ruling has significant implications for insurance companies, as it confirms their ability to recover input tax incurred on its supplies to a non-UK recipient. However, as the ruling only relates to periods prior to the adoption of Retained EU Law (Revocation and Reform) Act 2023, the position after 1 January 2024 remains unclear.

Impacted by the Offshore Looping Regulations and wish to discuss how you may make a refund claim? The Tax Team at Clyde & Co can assist further.