June 5, 2009

Aggregators up and down the land can breath a collective sigh of relief following a High Court ruling that says they are intermediaries rather than introducers and are not, therefore, liable to pay VAT on commissions.

Following half a decade of wrangling and uncertainty, the threat of massive retrospective tax bills finally melted away when‚ to put the thing in a nutshell‚ Sir Edward Evans-Lombe sitting as a judge of the Chancery Division of the High Court in the case of InsuranceWide.com v Revenue and Customs ruled that companies which offered introductory services, in order to channel would-be customers to insurers by electronic means, and which received a commission in the event of a contract of insurance being concluded were insurance brokers or insurance agents falling within the exemption from VAT provided for by Group 2 in Sch 9 to the Value Added Tax Act 1994, which implemented art 13B(a) of Council Directive 77/388/EEC on the harmonization of the laws of the Member States relating to turnover taxes.

The argument, essentially, is about whether aggregators do what brokers do (VAT exempt) or what advertising does (VAT liable). For now, at least, the issue has been resolved in favour of the aggregators and against the tax man. But an EU review could yet restrict the extent of aggregators’ exemption from VAT.



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