HM Revenue and Customs (HMRC), the UK tax authority, has advised that it will pay out
claims for overpaid value added tax (VAT) on insurance introductory services pending
a decision by the Court of Appeal in the Insurancewide/Trader Media Group
case.
However, HMRC advised in a Revenue and Customs brief issued on September 21
that it will only pay refunds of VAT in respect of insurance introductory services
and not introductory services relating to other financial contracts, even in
instances were the facts are very similar to the Insurancewide/Trader Media Group case.
Last May, the High Court found that Insurancewide and Trader Media Group’s (TMG)
supplies of online introductory services were exempt from VAT. The facts in each case
are slightly different; Insurancewide is a comparison website providing "click thru"
services to insurer or broker websites, whereas TMG provides "click thru"
services from its Auto Trader car auction site to a third party co-branded broker
website. Both are paid commission on successful take-up.
At tribunal, Insurancewide lost its appeal as it was found not to be acting as insurance
agent at any time, and appealed to the High Court. TMG, however, won
its appeal as the tribunal found that its services constituted insurance intermediary
services; HMRC appealed the decision to the High Court. Given the similarities
in the two cases, the High Court agreed to hear the appeals jointly.
The High Court found that Insurancewide and TMG were insurance intermediaries for the purposes
of the VAT exemption, and that an act of introduction with no further involvement
in the intermediation of the contract of insurance qualified for exemption as
an insurance-related service.
HMRC is of the view that the commissions paid to Insurancewide and TMG are not exempt
on the basis that there is not a significant difference between the services
they provide and advertising services. Income from the sale of advertising in
the UK is usually a "standard-rated" business activity and therefore
liable to VAT at the standard rate, currently 15%.
OFFSHORE-E-COM.COM
