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VAT and Insurance Intermediary Services – Aspiro

By March 17, 2016December 19th, 2017VAT news

The European Court of Justice (CJEU) has released it decision in the Polish case of Aspiro. The key question in this case was whether the VAT exemption that applies to insurance intermediary services can be applied to claims handling and management services. The case is very similar to the questions raised by the CJEU case in 2005 of Arthur Andersen and reaches the same conclusion – these services are not exempt as they are not provided by a business as part of finding prospective clients or introducing them to an insurer.

The court held that, for the services to fall within the VAT exemption for insurance intermediary services, the supplier must meet two conditions:

• It must have a relationship with the insurer and the insured party, either directly or indirectly. The court held that Aspiro had a direct relationship under its contract with the insurer. This contract also gave it an indirect relationship with the insured (presumably on the basis that the contract could not be performed if Aspiro did not interact with the insured by way of managing the claim); and
• The activities carried out by the supplier must cover the essential aspects of the work of an insurance agent or broker.

It is this second test that was not met. This was because Aspiro was not finding or introducing potential clients. It could therefore not be an insurance intermediary for the purposes of EU VAT law and its services are therefore standard rated. The court indicates that if a business does provide introductory services and also provides other services such as a claims handling then the service could be exempt (this then becomes a question of what is being supplied and whether it is one supply or not).

It is interesting to note that the Court refers to the UK Government position regarding consideration of the definition of insurance mediation under EU insurance law. It dismissed this reference on the basis that it was not relevant for the purposes of VAT law which has to be interpreted narrowly.

What does this mean for the UK?

The case basically reflects the position of the CJEU in the Andersen case which highlighted that the UK VAT law was too wide. HMRC chose not to make changes to the law or guidance following the case and state in their internal manual (VATINS5210) that claims handling and certain administrative services provided in the performance of an insurance contract can continue to be treated as being exempt from VAT until the EU FS review is concluded. This review is not on the agenda currently.

However, with another case adopting the same position we would recommend that claims handlers and other outsourcers in the insurance supply chain continue to monitor the position. Clearly the introduction of a taxable supply to the supply chain impacts on profitability within the chain.

Should you have any queries on the impact of this decision on your business as either a supplier of services to the insurance industry or as an insurer buying in services, please contact Sean McGinness on 01962735350 or at