Motor insurer Hastings was today slammed by the former chair of parliamentary public accounts committee after winning a £20m offshore trust battle with the taxman.
A legal ruling handed down last month found in favour of Hastings, allowing to it to recover VAT as a result of a Gibraltar tax structure.
Labour MP Margaret Hodge, who chaired the powerful government spending watchdog between 2010 and 2015, said it was “unacceptable” for Hastings to structure its affairs in such a way and urged HM Revenue & Customs (HMRC) to appeal the decision.
“It creates an unfair playing field over UK companies who are playing by the rules and this decision can only encourage other companies to follow suit,” she said.
Without any legislative change, on-going litigation will form a legal precedent. Hodge said she would be writing to the Treasury Select Committee to alert it to the Hastings ruling.
The row between Hastings and HMRC centres on whether the FTSE 250 insurer can claim back VAT charged on goods and services bought in the UK. Because insurers charge insurance premium tax rather than VAT, they are usually not allowed to recoup sales tax incurred.
However, Hastings said it should not be classified as an insurer in the UK because its policy underwriting is performed by a Gibraltar entity called Advantage.
The first tier tribunal determination in Hastings’ favour followed an “exhaustive process”, a spokesperson for the firm said.
“The judge’s findings are very clear on the principles and established facts,” the person added.
The ruling recognised Hastings has had substantial business operations in Gibraltar since 2002. The company’s spokesperson went on to say Hastings is “very clear and transparent” about the way it conducts its business and has paid over £320m in tax over the last three years.
In full – what Hastings said
“Hastings acknowledges the recently published ruling of the First Tier Tribunal and the determination in its favour. This ruling is the result of an exhaustive process where all the facts of the case have been fully presented and considered. The judge’s findings are very clear on the principles of law and established facts.
“Hastings notes that the ruling recognises the substantial business operations the group has in the British Overseas Territory of Gibraltar, which was established in 2002. The political and commercial relationships between the UK and Gibraltar are of long standing significance and importance.
“It is also important context that Hastings is a significant contributor to the UK economy, having borne and collected over £320m in UK taxes in the past three financial years and created around 1,500 new jobs in that time. The group’s published tax strategy is very clear and transparent about the way in which the group conducts its business.”