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Insurance Promotion: Vat Case No. 2 (Trader Media Group Ltd, Vat Tribunal 2008) |
THE CASE
Trader Media Group Ltd made supplies which were similar to the services supplied by Insurancewide.com Ltd (see the 2007 case we reported on 19 May 2008). Broadly, these services consist in advertising to the public on a website various insurance policies available from insurance suppliers/brokers.
Although in the 2007 case of Insurancewide.com Ltd the earlier services were found to be non-VAT exempt as passive promotion/advertising, its later services included the gathering of essential information from the users of the website. The 2007 VAT Tribunal found that these later services were VAT exempt.
The VAT Tribunal in Trader Media Group Ltd’s case also considered the meaning of “mediation services” (the term now used in EC VAT law), but ultimately reached the same conclusion: Trader Media Group Ltd did make VAT exempt supplies on the grounds that it did more than passively advertise the insurance suppliers/brokers; it also gathered essential information required by the insurance providers to supply detailed quotations and (potentially) to conclude a contract.
THE CONCLUSION
To ensure that VAT can be recovered on purchases, or to ensure that supplies to overseas VAT registered customers are zero-rated (as Reverse Charged promotion/advertising services), this case shows that it is sensible for the promoter to do nothing more than advertise the insurance-provider and introduce potential clients.
The essence of the both cases is that a non-exempt promoter is passive; whereas an exempt intermediary/agent is to some extent active (even if only in a small way) in “bringing together” or “mediating between” the insurance provider and the end customer.
So, to avoid VAT exemption, the promoter should not mediate between the insurance-provider and its potential clients; it should play no part in the negotiation of the contracts, not even to gather essential information; and the power to bind the insurance company should be specifically excluded from any contract between the promoter and the customer (i.e. insurance-provider). The promoter should also specifically disclaim being an “insurance agent” in its literature/invoices.
In the words of this 2008 VAT Tribunal: “It is the activity of the business concerned which must be looked at to see if the bringing together or introduction of the parties … formed an essential part in the chain leading to the conclusion of [an insurance] contract”.
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