In a decision that may give intermediaries and especially aggregators cause to reassess their VAT position as a matter of urgency, this recent VAT tribunal ruling highlights that merely providing intermediaries with an internet link to customers may be an insufficient service to benefit from the VAT exemption enjoyed by insurance intermediaries.
LeadX provides an internet service whereby brokers can buy and sell details of potential customers for insurance and other financial products. The issue before the VAT tribunal was whether LeadX's services were exempt from VAT because they provided intermediary services relating to insurance and the negotiation of credit and therefore fell within the exemption for VAT set out under Article 135.1 EC Directive 2006/112/EEC (VAT Directive).
The tribunal identified two elements to the role of an insurance agent under the VAT Directive: (i) a relationship with both the insurer and the insured (ii) in order to bring the two parties together with a view to the insurance of risks and activities typically undertaken by an insurance agent.
The VAT tribunal concluded that LeadX's services did not fall within the exemption. LeadX was not an insurance agent or broker because it had not have the appropriate relationship with either insurer or insured and did not bring together potential parties to an insurance contract. The Chairman noted:
"The information gathering and sorting exercise was for the purpose of making the lead marketable not to facilitate an insurance transaction. The suppliers did not form a close nexus with an insurance transaction and effectively constituted a separate deal outside any insurance negotiations."
A link to the tribunal's decision is: http://www. b a i l i i . o rg/cgi-bin/markup.cgi?doc=/uk/ cases/UKVAT/2008/V20904.html&query=title+(+leadx+) &method=boolean
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