National House Building Council v Commissioners for Her Majesty's Revenue and Customs
Decision date: 9 July 2010
Neutral citation: [2010] UKFTT 326 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerned whether VAT on remedial building work arranged by NHBC under its Buildmark section 2 warranty was deductible input tax or was attributable to NHBC's exempt insurance supplies. The Tribunal found NHBC becomes "on risk" when a registered builder defaults and that remedial work NHBC arranges is to discharge its insurance obligation as principal, not to procure taxable supplies for the builder. Accordingly the VAT charged by third-party builders was not deductible by NHBC and the appeal was dismissed.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
Where an insurer's contractual terms make it liable to indemnify or otherwise be "on risk" and it elects to arrange remedial services to discharge that liability, those services are used for the purposes of making the insurer's exempt insurance supplies; the insurer's subsequent right to recover costs from a defaulting third party does not by itself convert those arranged remedial services into supplies obtained for taxable transactions.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed (not as a decisive legal ratio) that NHBC's accounting treatment, regulatory status and description as insurance, and presentation of premiums as insurance income, support characterising the arrangement as insurance rather than a performance guarantee; and that the absence of a homeowner-paid premium does not preclude an arrangement from being insurance where another party pays the premium on which the homeowner relies.