Reply To: VAT on online insurance agent website business


There are two fundamental questions here:

1. Did the sale of the business qualify as a Transfer of a going concern (TOGC). If a business sale qualifies as aTOGC, the TOGC rules apply (mandatory) and the supply is outside scope of VAT. The main conditions are that the business is transferred as a ‘going concern’; intending to carry on the same kind of ‘business’ (not necessarily identical);- purchaser must be VAT-registered or immediately after transfer (which you were). In that case the seller should not charge VAT and neither should you claim VAT.

2. Whether the business broker /agent is VAT exempt or not. The recent litigation at the Court of Appeal in Services Ltd and Trader Media Group Ltd, where it was held that certain supplies of insurance introductory services provided via the internet were exempt from VAT. Following that decision, HMRC accepted that insurance introductory services are exempt from VAT where the provider of such services (“the introducer”) is doing much more than acting as a “mere conduit” through which a potential customer is passed to an insurance provider.

In HMRC Brief 31/10 HMRC detail four conditions that they expect to be present to secure exemption on the introductory services:

-The introducer is engaged in the business of putting insurance companies in touch with potential clients or more generally acting as intermediary between the two parties.

-The introducer provides the means (e.g. internet “click through”) by which a person seeking insurance is introduced to a provider of insurance.

-That introduction takes place at the time a customer is seeking to enter into an insurance contract.

-The introducer also plays a proactive part in putting in place arrangements under which that introduction is effected.

Where these conditions are met your supplies should be exempt.