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

The Court of Appeal considered whether on-line services that operate as a means of putting prospective insureds in touch with insurers fall within the Value Added Tax exemption for services "of an insurance intermediary" in Schedule 9, Group 2, Item 4 to the Value Added Tax Act 1994, which implements Article 13B(a) of the Sixth VAT Directive. The court applied EU jurisprudence (in particular the shift in approach marked by Case C-124/07 JCM Beheer BV) and held that the exemption can apply to a person who performs intermediary functions as part of a chain of intermediaries, provided the services rendered are characteristic of an insurance broker or agent. On the facts found by the VAT and Duties Tribunal, both InsuranceWide and Trader Media performed services characteristic of insurance brokers/agents (including identifying, selecting and directing customers to suitable insurers) and therefore fell within the Insurance Intermediary Exemption. The appeals by HMRC were dismissed.

This was an appeal by HM Revenue & Customs from an order of Sir Edward Evans-Lombe (Chancery Division) reversing decisions of the VAT and Duties Tribunal about whether two internet-based businesses (InsuranceWide and Trader Media) qualified for the VAT exemption for services "of an insurance intermediary" (Schedule 9, Group 2, Item 4 VATA 1994) implementing Article 13B(a) of the Sixth Directive.

Background and facts

• InsuranceWide ran an internet comparison and referral service from 1999 onwards. Its business developed through phases: initial conduit to a single insurer panel, a decision-tree phase linking to multiple insurers, the 'Wizard' (automated selection and shortlisting of insurers), InsuranceWidePlus (data transfer to insurers' systems) and InsuranceWideConnect (further integration). InsuranceWide received commissions from insurers and, in later phases, obtained FSA permission to act as an intermediary. Its terms and conditions included disclaimers that it did not act as agent or broker.
• Trader Media (publisher of Auto Trader) operated an online "Insurance Centre" through a contractual arrangement with a broker/operator (BISL/CompareTheMarket). Trader Media provided a doorway, had input into questionnaire design and panel composition, and received commission (paid via the broker).

Procedural posture

• The Tribunal had found that after the Wizard phases InsuranceWide was acting as an insurance intermediary and that Trader Media’s services were within the exemption. The Chancery judge allowed InsuranceWide’s appeal and dismissed HMRC’s appeal in respect of Trader Media. HMRC appealed to the Court of Appeal.

Issues framed

1. Whether the activities of each taxpayer amounted to acting as an insurance broker or insurance agent for the purposes of Article 13B(a) and Schedule 9, Group 2, Item 4 VATA 1994.
2. Whether the exemption requires a direct legal relationship with insurers or insureds or may apply where intermediary functions are performed as part of a chain.

Court’s reasoning

• The Court reviewed the Sixth Directive, the Insurance Directive, the Insurance Mediation Directive and the relevant ECJ case-law (Card Protection, Skandia, Taksatorringen, Arthur Andersen, Ludwig and, crucially, Beheer).
• The Court reiterated that exemptions must be interpreted consistently with EU jurisprudence and that Article 13B(a) should be interpreted strictly but not artificially narrowly; the supplier must show it fits a fair interpretation of the exemption.
• The Court identified core principles: the exemption for "related services" applies only to services performed by insurance brokers or agents; the Insurance Directive definitions are relevant but not determinative; a characteristic feature is a business of bringing insurers and prospective insureds together; and intermediary functions may be distributed along a chain of persons (the Beheer principle).
• Applying those principles to the Tribunal’s findings, the Court concluded that both InsuranceWide (post-Wizard phases) and Trader Media performed services characteristic of brokers/agents (selection, appraisal, shortlisting and directing customers to appropriate insurers) rather than mere advertising or simple "click-through" conduits. A direct legal relationship with insurer or insured was not a prerequisite if the taxpayer carried out intermediary functions characteristic of brokers/agents as part of a chain.

Relief sought: HMRC sought to overturn the Tribunal/Chancery findings and to deny the exemption to the two taxpayers. The Court dismissed HMRC’s appeals and upheld that the exemption applied on the Tribunal’s factual findings.

Appeal dismissed. The Court held that the VAT exemption for services "of an insurance intermediary" (Schedule 9, Group 2, Item 4 VATA 1994; Article 13B(a) Sixth Directive) can extend to persons who perform intermediary functions as part of a chain of intermediaries, provided the services they render are characteristic of an insurance broker or agent. On the Tribunal’s findings, InsuranceWide (in its post-Wizard phases) and Trader Media carried out such characteristic intermediary functions and therefore fell within the exemption; a direct legal relationship with insurer or insured is not an absolute prerequisite.

Appeals from the VAT and Duties Tribunal decisions (InsuranceWide Tribunal Decision released 8 November 2007; Trader Media Tribunal Decision released 8 May 2008) to the Chancery Division (Sir Edward Evans-Lombe: order made 15 May 2009 allowing InsuranceWide’s appeal and dismissing HMRC’s appeal in respect of Trader Media). HMRC appealed to the Court of Appeal (Neutral Citation: [2010] EWCA Civ 422; Case No A3/2009/1300).