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HMRC internal manual

VAT Insurance

Services of an insurance intermediary: insurance brokers and insurance agents: services of an insurance intermediary

The second of the two tests for exemption under Item 4 is that the services being supplied must be insurance related. Article 135 1 (a) of the Principal VAT Directive refers to “related services performed by insurance brokers and insurance agents”. The term “related services” is not defined, but it is clear that the services must be related to insurance transactions.

In UK law, the services of an insurance intermediary (‘insurance related services’ are outlined in Legal Note 1 of the Group 2 legislation. These were taken from the EC Council Directive 77/92/EEC (‘The Intermediaries Directive’) - see VATINS5110.

Note 1: For the purposes of item 4 services are services of an insurance intermediary if they fall within any of the following paragraphs -

a. the bringing together, with a view to the insurance or reinsurance of risks, of -

(i) persons who are or may be seeking insurance or reinsurance, and

(ii) persons who provide insurance or reinsurance;

b. the carrying out of work preparatory to the conclusion of contracts of insurance or re-insurance;

c. the provision of assistance in the administration and performance of such contracts, including the handling of claims;

d. the collection of premiums.

This list includes all the services you would normally expect an insurance broker or agent to provide. The list is comprehensive but it is important that only those services which involve the effecting of insurance contracts, and closely related preparatory and follow up services are included as insurance related services. So, a person provides an insurance related service for the purposes of the VAT exemption, only if they perform one or more of the services listed above.

Some of the above services now fall outside the exemption for insurance related services following Andersen, but may continue to be treated as exempt under UK law pending implementation of the Judgment. See VATINS5220.