The provision of services in order to direct future customers to insurers by electronic means were the services of an insurance brokers or insurance agents for the purpose of the exemption from VAT

These two appeals concerned the exemption from VAT contained in Schedule 9, Group 2, and Item 4 to the VAT Act 1994 for the provision of services by an insurance broker or insurance agent of any of the services of an insurance intermediary. The significant feature of both appeals is that each taxpayer claimed VAT exemption by virtue of the facility which they provided through their respective websites whereby customers had access to an insurer or an insurance broker/agent, and could enter into insurance contracts.

The Court held that both appeals raised the point as to whether, the taxpayers as ‘introducers’, were capable of attracting the exemption from VAT provided for in art 13B(a) as implemented in the 1994 Act. The Court considered that, in the context of article 13B, that there was effectively no difference between a professional described as an insurance broker and one described as an insurance agent. Whether they were exempt from VAT would depend on the functions they performed when making the relevant supply of services. Therefore, the issue was whether the introductory facility provided by both taxpayers constituted one or more service of an insurance intermediary as described in Schedule 9, Group 2, and Item 4 to the VAT Act 1994, thereby exempting those services.

The taxpayers contended that EU and UK legislation and case law pointed to the conclusion that an individual or organisation whose service was only to introduce customers to insurers, and who might even only form part of a chain of introducers and not necessarily the introducer immediately proximate to the insurer, was entitled to an exemption under article 13(B).

HMRC submitted that an introducer could not fulfill the role of an insurance agent or insurance broker within the legislation so as to attract the exemption on the basis that an introducer was not an intermediary for any purpose in the making of insurance contracts.

The Court considered that ECJ case law did not require a direct legal relationship with either party, and it sufficed that the agent or broker was carrying out a vital intermediary role in a chain of intermediaries. Companies which offered introductory services in order to direct future customers to insurers by electronic means were insurance brokers or insurance agents for the purpose of the exemption from VAT provided for in the VAT Act 1994.

The Court rejected HMRC's submissions and found in favour of the taxpayers.

The full text of the judgment is available at http://www.bailii.org/