HM Revenue and Customs v Insurancewide.Com Services Ltd & Anor

The insurance-intermediary VAT exemption must be interpreted consistently with EU VAT law. It is construed strictly, but not by choosing the narrowest possible meaning. The supplier must show that its activities fall within a fair interpretation of the exemption.

The exemption applies only to related services performed by an insurance broker or agent. That status depends on the activities actually performed, not on labels or disclaimers. A provider may perform only part of the characteristic intermediary functions, and may form part of a chain of intermediaries. A direct legal relationship with the insurer or insured, involvement in negotiation, and regulatory authorisation are not essential.

HMRC appealed against a High Court order dated 15 May 2009 concerning two online insurance services. The order allowed InsuranceWide’s appeal from the VAT and Duties Tribunal decision that its supplies fell outside the exemption, and dismissed HMRC’s appeal from the Tribunal decision that Trader Media’s supplies fell within it.

The services enabled website users to identify, compare and access insurers or insurance intermediaries. The appeals were initially argued on a preliminary issue divorced from the facts, but all parties agreed that the Court of Appeal should determine the substantive appeals by applying the law to the Tribunal’s findings. The central issues were whether the respondents acted as insurance brokers or agents and whether their online services were related intermediary services despite the absence of direct contractual links or negotiation of policy terms.

Etherton LJ gave the leading judgment. Pitchford LJ and Longmore LJ agreed. The two appeals were dismissed.

1. The exemption in Article 13B(a) of the Sixth Directive and Group 2, Item 4 of Schedule 9 to the Value Added Tax Act 1994 had to be interpreted consistently with the EU jurisprudence. It required strict construction because it was an exception to the general VAT charge, but strict construction did not mean adopting the narrowest possible interpretation. The supplier had to establish that its services fell within a fair interpretation of the exemption.
2. “Insurance broker” and “insurance agent” were autonomous EU law concepts. Whether a person had that status depended on what the person actually did. Self-description, disclaimers and regulatory status were not determinative. The Insurance Directive was relevant as evidence of insurance-law reality and practice, but its listed activities were neither exhaustive nor automatically sufficient.
3. An essential characteristic was the business of putting insurers in touch with potential clients, or otherwise acting as an intermediary between them. It was unnecessary for one person to perform every function of a broker or agent. Characteristic intermediary services could be divided among a chain of persons. Following [2008] STC 3360, a direct legal relationship with the ultimate insurer or insured was not required.
4. InsuranceWide and Trader Media did substantially more than provide a bare click-through facility. They selected or helped constitute panels of insurers, assessed competitiveness and consumer suitability, and directed prospective insureds efficiently to appropriate insurers or intermediaries. Their activities were therefore characteristic intermediary services. The absence of negotiation, policy preparation, premium collection, claims handling or power to bind an insurer did not defeat the exemption.
5. Financial Services Authority authorisation and contractual disclaimers were immaterial or inconclusive. The established principles were sufficiently clear, and the application of the exemption was highly fact-dependent, so an ECJ reference was neither necessary nor desirable. The dismissal of the appeals was not an endorsement of the High Court’s preliminary ruling divorced from the facts.

1. Court of Appeal (Civil Division) — In [2010] EWCA Civ 422, HMRC’s two appeals were dismissed.
2. High Court, Chancery Division — Sir Edward Evans-Lombe allowed InsuranceWide’s appeal from the InsuranceWide Tribunal Decision and dismissed HMRC’s appeal from the Trader Media Tribunal Decision by order dated 15 May 2009.
3. VAT and Duties Tribunal — The InsuranceWide Tribunal Decision held that InsuranceWide’s supplies fell outside the exemption. The Trader Media Tribunal Decision held that Trader Media’s services fell within it.