Insurancewide.Com Services Ltd v HM Revenue & Customs

For the VAT exemption for insurance transactions, an insurance intermediary may qualify by introducing prospective insured persons to insurers. The intermediary need not negotiate contractual terms, possess authority to bind an insurer, or maintain a direct relationship with every party in the chain. The relevant question is what the supplier actually does. An introductory service is distinct from advertising or from the provision of administrative support. The introduction may be supplied through separate services performed by different persons in a chain. Whether a particular service is introduction or advertising is a question of fact. Exemptions must be construed strictly, but not artificially narrowly: a supplier succeeds where its service falls within a fair interpretation of the statutory language.

Two appeals concerned contrasting decisions of the VAT and Duties Tribunal. HMRC appealed in relation to Trader Media Group Limited, whose website channelled prospective motor-insurance customers to insurers. InsuranceWide.com Services Limited appealed against a Tribunal decision concerning a similar internet-based referral service.

The parties agreed that the court should first determine whether a mere introductory or referral service could fall within the exemption in Article 13B(a) of the Sixth VAT Directive and Schedule 9, Group 2, Item 4 of the Value Added Tax Act 1994. The central questions were whether introduction was sufficient to constitute the activity of an insurance broker, agent or intermediary, and whether it constituted one of the services described in Note 1 to Group 2.

1. Disposition. The court answered both preliminary questions in the affirmative. A supplier providing an introductory service may fall within the insurance-intermediary exemption.
2. Construction. VAT exemptions are construed strictly because they are exceptions to the general rule of taxation. Strict construction does not require the narrowest possible meaning. A claim must be accepted where the supply falls within a fair interpretation of the exemption.
3. Relevant activity. The expressions “insurance broker” and “insurance agent” were effectively interchangeable in this context. Their status depended on the functions actually performed, rather than on the supplier’s description. An introducer is a person whose relationship with two or more parties enables them to be put in contact with a view to forming an insurance relationship.
4. Separate statutory functions. Note 1(a) to Schedule 9, Group 2 described the bringing together of persons seeking insurance and persons providing insurance. Note 1(b), concerning work preparatory to concluding contracts, described a separate function, which could include negotiating contractual terms. The absence of negotiation therefore did not prevent an introducer from qualifying.
5. Chain of services. Related services could be divided among several persons. A supplier need not have a direct relationship with both the insurer and the customer, provided that it formed part of a chain of introduction connecting them. Administrative or support services, by contrast, did not typify the activity of an insurance intermediary.
6. Advertising and regulation. Introduction was distinct from advertising, although the boundary was factual. Advertising displayed services to attract custom; introduction involved relationships with both prospective customers and potential suppliers and facilitated access between them. Whether a website service was introductory or merely promotional was for the Tribunal to determine. Financial-services regulation was not a statutory condition of exemption.
7. Final consequence. The introductory services in the two appeals could constitute exempt supplies under Article 13B(a) and Schedule 9, Group 2, Item 4. The judgment determined the preliminary issue; the remaining consequences for the appeals followed from that determination.

The judgment concerned appeals from two decisions of the VAT and Duties Tribunal:

• VAT and Duties Tribunal: decision dated 8 May 2008 in the Trader Media appeal, allowing Trader Media’s appeal against HMRC.
• VAT and Duties Tribunal: decision dated 8 November 2007 in the InsuranceWide appeal, dismissing InsuranceWide’s appeal against HMRC.
• High Court (Chancery Division): determined the agreed preliminary issue in favour of the Taxpayers by answering both questions affirmatively.