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Limits on the VAT exemption for insurance intermediaries

06 November 2014. Published by Ben Roberts, Partner

A recent Tax Tribunal decision highlights the limits of the VAT exemption for supplies by an insurance intermediary.


For insurance "intermediary" services to be VAT-exempt, all of the following must be met:

  1. an insurance broker or agent;
  2. provides services of an "insurance intermediary";
  3. where those services relate to an insurance transaction; and
  4. are provided by the broker/agent in the course of acting as an intermediary

Bringing together would-be insurers and insureds counts as "insurance intermediary" services for these purposes.


The taxpayer (Westinsure) provides an 'interface' between brokers and insurers. The brokers pay a joining fee and annual membership fee (calculated by reference to the premium income generated by the broker) to join the taxpayer's alliance. The taxpayer identifies suitable insurers to offer 'exclusive' products, and beneficial commissions, to its member brokers. These insurers pay an annual commission to the taxpayer.

According to the published decision, the advantages of the Westinsure arrangement are that:

  • the buying power of the broker members is harnessed to elicit more favourable terms and commission from insurers;
  • minimum business requirements, often imposed on brokers by insurers, are waived.

Westinsure argued that its services to broker members were VAT-exempt insurance intermediary supplies. HMRC disagreed, stating that the services should be standard-rated for VAT.


The Tribunal held that the taxpayer was not entitled to the VAT exemption:

  • the exemption applies only to services provided by an agent or broker.  The question to ask was whether the taxpayer's activities amount to what an agent or broker typically does.
  • a person is not an agent or broker if there is no relationship (direct or indirect) with the potential insured.
  • on the facts, the taxpayer was not an agent. It was not acting on behalf of insurers.
  • the taxpayer could only be a broker if it provided a service to a potential insured by finding a suitable insurer. On the facts, the taxpayer was not a broker. It did not negotiate the terms of specific transaction, nor act for would-be insureds, nor assess the needs of would-be insureds. There was no relationship with the potential insured.


Although recent decisions in this area (notably InsuranceWide) have demonstrated that indirect relationships with a potential insurer and insured may be sufficient to enable a supply of services by an intermediary to qualify for VAT exemption, it remains critical that the intermediary is part of the chain bringing insurer and insured together. In Westinsure, the taxpayer merely facilitated its broker members forming such a chain.

Tax Tribunal decision