HMRC Loses Right To Tax Web Firm's Insurance Commissions

by Robin Pilgrim, LawAndTax-News.com, London

19 May 2009

The UK High Court has ruled that price comparison website Insurancewide will not be required to pay value-added tax (VAT) on internet-based insurance commissions.

The ruling comes after nearly five years of negotiations with HM Revenue and Customs (HMRC) over whether the services provided by Insurancewide were insurance intermediation services or merely advertising.

Traditionally commissions that are paid to insurance agents and brokers are exempt from VAT, whereas advertising based businesses are required to pay VAT.

An insurer is unable to recover the VAT that they are charged on such commissions and any VAT charge is usually passed on to customers in the form of higher premiums.

Insurancewide argued that its competitors were not required to pay VAT on website based insurance sales and that it had been unfairly singled out by HMRC.

However, HMRC took the view that the commissions paid to Insurancewide were not exempt on the basis that there was not a significant difference between the service provided by Insurancewide and advertising services.

The law seeks to exempt intermediary services provided by an agent or broker. It goes on to define Intermediary services for these purposes as bringing together people seeking insurance with those providing it. It also excluded the provision of advertising from the exemption.

Tom Kivlehan, tax partner at BDO Stoy Hayward, which represented Insurancewide said: “After five long years of dialogue and litigation with the Revenue we have finally achieved justice for our client. We always felt that HMRC had treated our client unfairly, so we are very pleased with today’s outcome, and believe that common sense has now prevailed.”

David Harrison, Chairman, Insurancewide added: “This has been a difficult time for the company and now at last all the team at Insurancewide can concentrate their efforts on building our business for the future.”

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