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HMRC have publsihed guidance on the VAT treatment of insurance introductory services following the VAT tribunal decision in InsuranceWide.com Services Ltd (InsuranceWide).

In this case 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 rate.

The decision confirms HMRC’s published policy in this area (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.

Link

HMRC Brief 69/07