High Court backs VAT aggregator exemption

Online aggregators have been saved from a multi-million pound tax bill after Insurancewide.com won a landmark ruling.

The High Court ruled that both Insurancewide.com and Trader Media Group are exempt from paying VAT on commissions because they are “intermediaries”.

Aggregators do not pay VAT on commissions, however that could have changed if the ruling had gone against the two companies and they had been classified as “introducers”, which is classed as a form of advertising.

Insurancewide.com chief executive James Harrison said: “We have not been charging insurers VAT. So we would have had to face claiming the VAT from the insurers or paying the VAT bill ourselves. There would have be a significant liability, but we won, so there is not one.”

He added: “If we were to lose it would have certainly have had a knock-on effect for the rest of the industry.

“Insurancewide.com was the first aggregator to be investigated by HM Revenue & Customs, which used it as a test case instead of pursuing other companies in the same industry.”

Richard Mason, managing director of Moneyextra.com and chairman of the Price Comparison Consortium said: “Moneyextra doesn’t pay VAT on any introductions it makes. The guidance given to us by HMRC has always been that when a business acts as a broker, such activity is VAT exempt.

“In relation to Autotrader and InsuranceWide, the question was whether the companies were acting as either ‘broker’ or an ‘introducer’ as there was some ambiguity as to whether an introducer would have to pay VAT.

“This ruling sweeps away any ambiguity, to the great relief of many businesses in this sector, who had previously been forced to move their centre of operations abroad, to stay in business.”

Mark Chesham, director at tax consultants BTG Tax, said: “This is a welcome clarification of a contentious area of VAT law. We still await however the outcome of the EU review which may still restrict the scope of the exemption for these types of services in future.”