VAT – Insurance introductory services
HMRC have set out their view on supplies of insurance introductory services provided via the internet. This follows the Court of Appeal Judgment against HMRC in Insurancewide and Trader Media Group.
In that case the Court of Appeal found against HMRC and upheld the High Court’s decision that certain supplies of insurance introductory services provided via the internet are exempt from VAT. HMRC have confirmed that they will not be appealing this decision any further.
The decision specifically concerned the VAT liability of internet ‘click-through’ services and whether introductory services with no further involvement in the intermediation of the contract of insurance, qualified for exemption as an insurance related service.
HMRC now accept that insurance introductory services will be exempt from VAT when a provider is doing much more than acting as a ‘mere conduit’ through which a potential customer is passed to a provider.
HMRC have listed the following four conditions which need to be met for this to be the case:
- The services are provided by someone engaged in the business of putting insurance companies in touch with potential clients or more generally acting as intermediaries between the two parties (although this may not necessarily be their principal business activity).
- The business provides the means (that is, by way of an internet ‘click through’ or some other form of introduction) by which a person seeking insurance is introduced to a provider of insurance or to another intermediary in a chain leading to an insurance provider.
- That introduction takes place at the time a customer is seeking to enter into an insurance contract (although in some instances an insurance contract may not actually go on to be finally concluded).
- The introducer also plays a proactive part in putting in place the arrangements under which that introduction is effected (HMRC suggest some examples in their business brief on the subject).
HMRC have said that they will process claims for overpaid tax charged on insurance introductory services that fall within the findings of the Court of Appeal decision, subject to the normal rules on capping and unjust enrichment.