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October 2015

Extent of the VAT insurance intermediary exemption – tightening of HMRC’s view?

By Uncategorized|VAT news

The recent first tier tax tribunal case of Risktop Consulting Limited ( [2015] UKFTT 469 (TC)) seems to represent further evidence of HMRC considering the scope of the UK insurance exemption, notwithstanding their published guidance which states that until the EU Financial Services review is concluded the UK exemption will remain in force.  HMRC agreed during the hearing that this is the case, but appear to be tightening their interpretation on what does and does not fall within the broad UK definition of an insurance intermediary.

The case questioned whether a company that provided surveys and related recommendations to insurers on the level of risk, fell within the exemption for services of an insurance agent acting as an intermediary between the insurer and the potential insured. This is key in an insurance environment as insurers, and others in the insurance supply chain, are VAT sensitive and additional VAT charged will affect margins of suppliers, or represent an additional cost to insurers or their agents who buy in the services.  Risktop had twice been advised by HMRC that their services were exempt, prior to HMRC changing its position.

The Riskstop case

The services in question broadly involved providing a risk report to insurers regarding the potential risk of insuring a particular party.  The report also contained risk improvement recommendations which Risktop assisted the insured/potentially insured party in complying with before a specified deadline to ensure they were covered.  Risktop would also inform the insurer if the deadline would not be met, and the insurer would then decide whether to, for example, change the level of risk/premium or extend the deadline.

Riskstop were instructed and paid by the insurer but also had close contact with the insured. The corporate group had previously received a ruling (for another group entity) that the services came within the VAT exemption. HMRC changed their view and contended that the services did not fall within the VAT exemption for insurance intermediary services as Risktop was not acting as an insurance agent but was instead acting as an outsourced function of the insurer.  As it was not an agent (and it was agree it was not a broker) it could not fall within the exemption for insurance intermediary services.

Wider impact

HMRC could seek to use the decision to review other services being provided in the insurance supply chain.  It is interesting that HMRC referred to aspects of the Arthur Andersen decision, when it has previously stated that the main principal of that case regarding the scope of the UK exemption being too wide would not be implemented in UK law until the EU’s financial services review is concluded.  It would appear however they are now reviewing the scope of the exemption for insurance intermediaries/related transactions (there is also an ongoing appeal in the case of Westinsure relating to the scope of the intermediation exemption). It is therefore something that both service providers and recipients should consider.


If you would like to discuss the impact of this case on your business in further detail, please contact Sean McGinness on 01962 735 350.