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HMRC internal manual

VAT Insurance

Services of an insurance intermediary: introductory services: insurance intermediaries on the internet

The internet is increasingly being used by those seeking insurance. Many insurance companies provide their own websites to offer insurance policies. Other websites provide access to an Insurer’s or broker’s website “via a click through” link. Still others offer a comparison service which directs customers to insurance products that best suit their particular requirements.

It is necessary to determine when these services qualify as exempt insurance intermediation.

Following the Court of Appeal decision in Insurance wide/Trader Media Group (A3/2009/1300) HMRC accept that the exemption will apply to internet services when a provider is doing more than acting as a “mere conduit” through which a potential customer is passed to the website of an insurer or broker.

This can be demonstrated by all of the following conditions being met:

  1. The services are provided by someone engaged in the business of putting insurance companies in touch with potential clients or more generally acting as intermediaries between the two parties (although this may not necessarily be their principal business activity).
  2. The business provides the means (that is, by way of an internet “click through” or some other form of introduction) by which a person seeking insurance is introduced to a provider of insurance or to another intermediary in a chain leading to an insurance provider.
  3. That introduction takes place at the time a customer is seeking to enter into an insurance contract (although in some instances an insurance contract may not actually go on to be finally concluded).
  4. The introducer also plays a proactive part in putting in place the arrangements under which that introduction is effected.

For the purposes of condition 4 above, evidence that the introducer has been proactive in putting in place the arrangements under which the introduction is effected could, for example, take the form of some or all of the following:

  • Active endorsement of the insurer or the insurance product,
  • Involvement in the selection of the insurance products and/or providers,
  • Involvement in the process under which the insurance contract is entered into, even though the intermediation of the contract itself is undertaken by a third party (for example, by having input into what questions should be asked of the prospective insured or the design of the third party’s website),
  • Negotiating a special rate for the insurance products on behalf of its customers or membership base,
  • Some form of assessment of the customers requirements so that they are directed to the most appropriate insurer for them.