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The VAT treatment of supplies to insurers of certain misselling reviews and helpline services is to change in light of enquiries received from the European Commission (EC).
Businesses that supply banks and other lenders with payment protection insurance (PPI) misselling review services will not be affected because these have always been subject to VAT.
Misselling review services and standalone helpline services supplied to insurers by insurance intermediaries were previously exempt.
The treatment was based on UK case law: Century Life plc v CCE [2001] STC 38, which concerned the provision of pensions mis-selling review services by an insurance agent, and C & V (Advice Line) Services Ltd (17310), which covered the services of a legal helpline that advised insurance policyholders on the making of insurance claims.
The EC has decreed that recent judgments of the Court of Justice of the European Union on insurance-related services supercede the UK decisions, and HMRC have agreed.
The Revenue now considers all misselling review services to be liable to VAT at the standard rate. The new policy applies to supplies made on or after 1 April 2013. It will not apply retrospectively. Details are provided in Revenue and Customs Brief 33/12.
If an insurance broker or agent provides helpline services to an insurer as part of a single supply that includes the provision of exempt insurance related services, the supply will have a single VAT liability, which will be determined in accordance with its principal element.
HMRC’s VAT Insurance Manual and Notice 701/36 will be updated in due course, said the department.
