HM Revenue and Customs Brief 69/07
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Issued 19 November 2007
VAT: The decision of the tribunal in InsuranceWide.com Services Ltd
This Revenue & Customs Brief concerns the VAT treatment of insurance
introductory services following the VAT tribunal decision in InsuranceWide.com
Services Ltd (InsuranceWide). The tribunal found that certain internet services
provided to insurers and brokers in connection with the arranging of insurance
policies do not fall within the exemption for insurance related services
provided by insurance brokers and agents and are liable to VAT at the standard
InsuranceWide provides an online comparison website service, putting
potential customers in touch with insurers via a click-through from its website
to that of an insurer or insurance broker. It receives commission from the
insurers based on the number of contracts that result from the introductions.
Over the years, the services provided by InsuranceWide have changed as
technology has developed.
In 2002 InsuranceWide introduced a system known as the InsuranceWide Wizard
which automated the selection process by obtaining and recording the essential
information required by insurers and applying that information to guide each
prospective customer through to the most appropriate insurer or insurers. This
information is discussed regularly with insurers to ensure it is kept up to
The Tribunal found that none of the services provided by InsuranceWide fell
within the VAT exemption because InsuranceWide was not an insurance agent.
InsuranceWide specifically disclaimed being an agent on its website and was
found to be playing no part in the negotiation of the contracts. Neither did
InsuranceWide have the power to bind the insurance company which the tribunal
found to be one of the indicators of an agency relationship (although not it
itself determinative for VAT purposes).
Having found against the Appellant on this basis, the tribunal then went on
to consider whether any of the services provided by InsuranceWide qualified as
the 'services of an insurance intermediary' (under UK law) or insurance 'related
services' (under EU law) which would have made them exempt had InsuranceWide
been an insurance agent.
The tribunal found that, in performing the non-Wizard services,
InsuranceWide’s role was not that of a mediator between the parties to a
contract of insurance. It found that InsuranceWide was 'nothing more than an
introducer and its role…..cannot be properly distinguished from that of an
advertiser in that via its website it had no interaction with either party
beyond making the one aware of the other and providing a means of one contacting
After the introduction of the Wizard, however, the tribunal found that
InsuranceWide’s services went beyond that of a mere promoter of, and introducer
to, insurance companies and would qualify for exemption under both UK and EU law
when provided by an insurance agent or broker. In particular the tribunal
highlighted the regular negotiations with insurers about the range and price of
products, the saving of time for both the insurers and would be insureds by
referring only suitable applicants to appropriate insurers and assisting with
the completion of forms.
Implications of the decision
The decision in InsuranceWide confirms HMRC’s current published policy in
this area (see in particular paragraph 10.5 of Notice 701/36, Insurance) and, as
such, does not have implications for any of the insurance-related services that
HMRC currently see as falling within the VAT exemption.
Whilst certain services provided via the internet were found to be liable to
VAT, HMRC do not see the decision as applying to all internet services and
accept that, where the necessary criteria are met, some internet services can
fall within the VAT exemption and it is the arrangements between the parties and
the nature of the services themselves that determines the VAT liability and not
the means by which those services are delivered.
HMRC see the decision as applying, in particular, to advertising/promotional
type services such as internet ‘click through’ services and mail-shot and
leaflet distribution services where the provider does little more than put one
party in touch with the other and plays no part in any interaction between the
parties once that introduction has been made. Such services are specifically
excluded from the VAT exemption and are taxable regardless of whether (as with
InsuranceWide’s co-branded websites) the products are promoted in the name of
the provider of the service, the provider is an insurance agent or broker by
profession, or whether payment is made by fee or commission.
In circumstances (which would include certain ‘affinity’ arrangements) where
the provider is clearly acting as an agent of an insurer or insurers and is
playing a more active role in arranging the policies than mere introduction –
for example, negotiating terms and conditions of the insurance contacts,
assisting with forms/queries and actively recommending/endorsing the insurance
product/s – VAT exemption continues to apply.
About the Author
© Crown Copyright 2007.
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Article Published/Sorted/Amended on Scopulus 2007-11-22 22:56:15 in Tax Articles