Update: VAT exemptions for online insurance agents

HMRC has issued a clarification on its position with regards to VAT charges for insurance introductory services. Shimon Shaw outlines the key details.

Earlier this year HMRC lost a VAT case against Trader Media Group and Insurancewide.com at the Court of Appeal. In Revenue & Customs Brief 31/10, HMRC confirmed it would not appeal the case further and has set out its approach going forward.

Both companies operated websites which effectively matched customers with groups of insurers and provided them with quotes. They were paid a commission if an insurance contract resulted. The terms and conditions with customers provided that they were not insurance agents or brokers. Trader Media’s website enabled customers to “click-through” to an insurer.

The companies argued that the services were exempt from VAT on the basis that they acted as insurance brokers or agent in supplying the services of an insurance intermediary. The VAT Act 1994 (Sch 9, Group 2, Item 4) states that the services of an insurance intermediary are exempt if they are related to an insurance transaction and are provided by the broker or agent in the course of his acting in an intermediary capacity between an insurer and a person seeking insurance. The Act defines this as the bringing together of insurers and prospective insureds, carrying out work preparatory to the conclusion of insurance contracts, assisting in the administration and performance of such contracts and the collection of premiums.

Continued...