matthew_wentworth_phOn Monday 21 January the Supreme Court will begin hearing the case of WHA Limited and another v Her Majesty’s Revenue and Customs.

The hearing is an appeal from the Court of Appeal decision in 2007 (interestingly, the lead judgment in the Court of Appeal was by Lord Neuberger, the current president of the Supreme Court). The case had been stayed pending the decision in a different case before the Court of Justice of European Communities (“CJEU“), which could potentially impact upon the case.


The case concerns an arrangement involving the first Appellant (“WHA“) to minimise the overall VAT liability in relation to the supply of repairs and parts pursuant to motor breakdown insurance (“MBI“).

In particular, the arrangement was designed to overcome the fact that an insurance company would not normally be able to recover the VAT it incurs on the supply to it of repairs and parts because it is making VAT exempt supplies of insurance.

The facts of the arrangement were highly complicated, but in essence what happened is as follows. National Insurance & Guarantee Corporation plc (“NIG“) supplied MBI to individual customers. NIG entered into an agreement with a company incorporated in Gibraltar, Crystal, for the reinsurance of its liabilities under these MBI policies. Crystal then retroceded 85% of the reinsurance to another Gibraltar company, Viscount (the second Appellant). Viscount contracted with WHA to enter into agreements with garages for the making of any repairs required under the MBI policies. WHA and the Gibraltar companies were all in the same group of companies.

When a customer made a claim under its MBI policy, WHA would directly invoice the garage making the motor repairs for the cost of those repairs (and any necessary parts). That supply was subject to VAT. WHA would invoice Viscount for the services it provided to Viscount.

WHA argued that (i) its supply of services to Viscount was exempt from VAT; and (ii) it was entitled to recover as input tax the VAT on the supply to it by the garages (under section 24(1) of the Value Added Tax Act 1994).


HMRC first argued that the garages made no supply for VAT purposes to WHA. Rather, the garages made supplies of repairs to the insured customers of NIG. As such, WHA was not entitled to recover the VAT in relation to this supply as input tax.

More importantly, HMRC argued that the EU law doctrine of “abuse of rights”, developed by the CJEU in Halifax plc v Customs and Excise Commissioners, should apply on the facts, such that the arrangements involving NIG, WHA and Viscount should be redefined in order to prevent WHA recovering this VAT as input tax, because to allow it to do so would be an abuse of the right of input tax recovery provided under the VAT Directive.

WHA is the one of the first cases to reach the Supreme Court in relation to how the abuse of rights doctrine applies in the context of VAT. It will be of interest to see how the Supreme Court applies the doctrine in this case, as it will help define the scope of the doctrine for future cases.