The judgment, which upheld a ruling made by a VAT tribunal, dismissed a challenge from Card Protection Plan (CPP) that its service, used by Midland Bank and Marks & Spencer, solely involved the supply of insurance - on which VAT is not charged.
Mr Justice Popplewell found that CPP provides both insurance and a convenience, and is therefore liable for VAT.
Some other card-protection companies, such as Sentinel Card Services, which provides cover for Barclays, Lloyds and NatWest customers, have always paid VAT. The card-protection service costs about pounds 8 a year, but competitive pressure might prevent CPP from passing on the pounds 1.40 VAT cost.
CPP has 28 days in which to appeal. If it won, it would then be liable for the new 3 per cent tax on insurance premiums imposed by last week's Budget.Reuse content