Guarantee Protection Insurance Limited v Commissioners for Her Majesty's Revenue and Customs

Facts

Guarantee Protection Insurance Limited is a specialist insurer, around half of whose business consists of providing domestic insurance backed guarantees (IBGs) to customers of contractors, including double-glazing firms, so that a contractor's guarantee is honoured if the contractor goes out of business. The administrative work was carried out by its intermediary, Warranty Services Limited, trading as QANW. Contractors supplied customer names monthly and paid QANW a premium of £8 to £12 per policy plus IPT; QANW issued the policy documents and passed the net premium and IPT to the appellant, which accounted for the IPT to HMRC. One contractor, Pennine Windows (Home Improvement) Limited, paid £9 plus £0.45 IPT per IBG for over a decade. In the summer of 2005 Pennine told QANW that its guarantees would in future be provided by a new company, Pennine Guarantees Limited, and PGL then put in place with Pennine's customers a set of Guarantee Agreement Conditions of Sale under which the customer paid PGL a 'Guarantee Premium' of 12.5% of the purchase price, capped at £1,562.50. The appellant and QANW learned of this only in April 2007, after a VAT inspection of Pennine. On 24 December 2007 HMRC assessed the appellant to IPT of £118,010 for September 2005 to March 2007 on those larger sums, and the appellant appealed.