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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Leadx v Revenue & Customs [2008] UKVAT V20904 (19 December 2008)
URL: http://www.bailii.org/uk/cases/UKVAT/2008/V20904.html
Cite as: [2008] UKVAT V20904
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- The Appellant was appealing against the Respondents' decision on review dated 7 September 2007 that its supplies were not exempt under schedule 9 of the VAT Act 1994.
- The Appellant described its business activities on its VAT registration form as, "the provision of telecommunication and data services in order to provide a facility for the trading of loan and insurance leads". The Appellant's business involved providing an open market where sales leads involving loans and insurance products could be bought from and sold to brokers who were willing to purchase them via its internet based bidding system.
- The Appellant contended that its services were exempt from VAT pursuant to items 2 and 5, group 5, schedule 9 of the VAT Act 1994 in respect of loans and pursuant to item 4, group 2, schedule 9 of the VAT Act 1994 in respect of insurance, warranties, and motor breakdown insurance. In contrast the Respondents submitted that the Appellant's supplies were standard rated as they consisted solely of the collection and sale of data.
- The issues in respect of the Appellant's supplies in connection with loans were whether they constituted:
- The issue in respect of the Appellant's supplies linked to insurance, warranties and motor breakdown insurance was whether they were provided in the course of acting in an intermediary capacity, related to insurance transactions and performed by an insurance broker or insurance agent.
- Articles 135.1(b) and 135.1(c) Directive 2006/112/EC ("VAT Directive") exempt from VAT:
- Articles 135.1(b) and 135.1(c) are enacted in item 2 group 5 schedule 9 VAT Act 1994 which exempts supplies relating to the making of any advance or the granting of any credit from VAT.
- Item 5 group 5 schedule 9 VAT Act 1994 exempts the provision of intermediary services in relation to any transaction comprised in item 2 above (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity.
- Note 5 to group 5 defines intermediary services as
- Note 5A expands upon the definition of intermediary services as
- Article 135.1(a) of the Directive exempts from VAT insurance and re-insurance transactions, including related services performed by insurance brokers and insurance agents. Article 135.1(a) is incorporated in UK legislation in item 4 group 2 of schedule 9 of the VAT Act 1994 which exempts from VAT:
- The notes to group 2 expands upon the meaning of intermediary capacity:
- I heard evidence from Mark Simpkins, Financial Director for the Appellant. Bundles of documents were admitted in evidence.
- The Appellant was incorporated on 28 June 2005 and registered for VAT with effect from 06 September 2005. On the form VAT1 the Appellant described its business activities as, 'the provision of telecommunication and data services in order to provide a facility for the trading of loan and insurance leads'. The Appellant provided an open market where sales leads could be bought from and sold to brokers who were willing to purchase them via its internet based bidding system.
- The brokers selling the leads (the seller) provided information to the Appellant either in electronic form or by telephone. The information was then analysed by the Appellant's software programmes into various categories of lead types. The broker buying the leads (the buyer) would have entered bids for specific lead types. The software would then allocate the specific lead type to the highest bid recorded on the software platform.
- The Appellant's relationship with the seller and buyer was governed by the same generic contract. Under the contract the Appellant granted the seller and buyer a non-exclusive licence to use the Appellant's software platform in return for consideration which consisted of 10 per cent of the fee charged by the seller, and a commission of 15 per cent on the price paid by the buyer. The consideration was not dependent upon the buyer completing a contract for credit or insurance but triggered when the requirements for a chargeable lead were met, which was defined by the contract as:
- The Appellant was contracted to sell a lead to the buyer with the highest bid at or above the seller's asking price.
- The contract specified that it should not be taken as creating or evidencing the fact that either party was an agent-principal, partner, employer–employee and/or partnership relationship with the other party. Further the parties agreed that the contract did not constitute a commercial agency agreement.
- The leads fell in two broad categories, financial which involved persons seeking secured and unsecured loans, and insurance which included household and car insurance, used car warranties and motor breakdown insurance.
- The information on unsecured loan leads was supplied by the seller electronically either by e mail or CVF files and transferred automatically onto the Appellant's software platform which identified the highest bidder. In relation to secured loans the Appellant received information about leads by telephone until 22nd October 2007 when the Appellant decided to cease the telephone operation as it proved uneconomic because of the credit crunch. The insurance leads were received either by telephone or electronically.
- Telephone leads were made by sellers either by "hot key" (where the consumer was passed over to the Appellant from the seller while still on the telephone) or by calling the Appellant with the consumer's details.
- Under the "hot key" arrangement the seller explained to the consumer that he cannot help him, but the seller can put him through to a company with a product better suited to his needs. The call was then transferred to the Appellant where it was recorded, stored and transferred on to whoever was offering the best price for that lead. The transfer was done at the touch of a button, with an electronic voice guiding the consumer through a process that lasted seconds.
- When the Appellant operated a "hot key" for secure loans a member of the Appellant's staff would contact the consumer and confirm the current state of his indebtedness and the existence of any county court judgments. Likewise where the lead concerned car insurance for an impending purchase of a second hand car, the Appellant would contact the consumer with a view to generating interest in the purchase of a used car warranty or motor breakdown insurance. The Appellant also had the facility to call back the consumer after his details had been passed to the highest bidder. This was used to check whether the consumer was satisfied with the broker's services, and if not to pass the lead onto another broker. The procedure for receiving information under an ordinary telephone call was the same as that for the hot key except that it was the seller providing the information as opposed to the consumer.
- The Appellant also sold cold data of past applicants to bidders. The selling of cold data did not form part of the Appellant's Appeal.
- The purpose of the Appellant's business was to provide an open market for brokers to sell information about potential customers for financial and insurance products which they could not convert into sales to other brokers.
- The Appellant did not sell financial or insurance products to the public.
- The Appellant's services were supplied to brokers from whom they received payment.
- The nature of the Appellant's supplies was to give the brokers non-exclusive access to its software platform.
- The Appellant's consideration for its supplies was not dependent upon the buyer broker converting the lead into a sale. The contract with the brokers was concluded effectively when the lead was passed onto the buyer.
- The Appellant's business objective was to achieve the highest price for the lead. Its objective was not to secure the best financial or insurance product for the consumer.
- The Appellant's operations were geared to refining the information supplied by the seller into marketable leads. They were not designed to match consumers with the most appropriate broker given the consumer's requirements.
- The Appellant generally processed the information electronically without involvement of a member of staff. Where a member of staff contacted the consumer it was for the purpose of achieving a better fit with the criteria laid down by the buying broker.
- The contract between the Appellant and the brokers did not create an agency relationship.
- The Appellant's relationship was with the selling and buying brokers. It had no relationship with the potential consumer, and the ultimate provider of the insurance or loan products.
- The respective wordings of the VAT Directive and the UK legislation dealing with the exemption for supplies connected with the granting of credit were not identical. The VAT Directive exempted the negotiation of credit from VAT, whereas the UK legislation referred to the provision of intermediary services in relation to transactions concerning the granting of credit. The parties appeared to accept that there was no substantive difference between the respective wordings of the VAT Directive and the UK legislation and that the key issue in dispute was whether the Appellant was engaged in the activity of negotiating credit.
- The Appellant contended that negotiation was an act of mediation which may consist, amongst other things, in pointing out to one party to the contract suitable opportunities for the conclusion of such a contract, without the negotiator having any interest of his own in the terms of the contract (see Ludwig v Finanzamt Luckenwalde [2008] STC 1640 ECJ and CSC Financial Services [2002] STC 57 ECJ). Further the fact that a person has no contractual link with any party to a credit agreement did not preclude his services from amounting to negotiation of credit (Ludwig v Finanzamt Luckenwalde).
- The Appellant referred to the Court of Appeal decision in Customs and Excise Commissioners v Civil Service Motoring Association Ltd [1998] STC 111 CA which established that more than one intermediary might be involved in the negotiation of credit. The Appellant also cited the Tribunal decision in Smarter Money Limited (Decision 19632) which found that electronic capturing of appropriate data could constitute negotiation.
- Turning to the facts of this Appeal, the Appellant pointed out that it received information about applicants for loans and their financial requirements from other brokers. In the case of secured loans (until October 2007) the Appellant had telephone contact with applicants to confirm and supplement the information received from the selling brokers. In all cases the Appellant's software platform sorted the information received and compared it against the criteria set by buying brokers in order to match applicants with the most appropriate broker. Given those facts the Appellant maintained that it was providing applicants with suitable opportunities to conclude their loan applications, which in the Appellant's view was sufficient to constitute negotiation within the meaning of the VAT Directive and the provision of intermediary services as defined by the VAT Act 1994. The facts that the Appellant had no contractual relationship with applicants or that it was one of the intermediaries in the transaction for credit were irrelevant.
- The Respondents, on the other hand, contended that the Appellant was not involving itself in any negotiation, as there was no distinct act of mediation. The Appellant's involvement was merely to put the information into a form which could be sold onto another broker. The Appellant's participation was outside the negotiation of credit between applicants and brokers, and, therefore, did not constitute an exempt supply of financial services. The Respondents relied on the European Court of Justice decisions in SDC v Skatteministeriet [1997] STC 932, and CSC Financial Services to support their contentions.
- My starting point is to examine the purpose of the exemption of financial services, in particular the granting and negotiation of credit, in the VAT directive. I derive the following principles from the Advocate General's opinions and European Court decisions in Skatteministeriet, CSC Financial Services and Finanzamt Luckenwalde[1]:
- It is clear from the above analysis that I am concerned with the nature of the Appellant's supplies and whether they could be characterised as the granting or the negotiation of credit. My findings of fact demonstrated that the essential character of the Appellant's supplies was to provide a facility whereby a broker could sell leads of potential customers to another broker. The Appellant's contact with potential consumers was for the purpose of enhancing the marketability of the lead not to secure a financial product for the consumer or to match him with the most appropriate broker. I find that the Appellant's supplies were about selling leads, not about the making and negotiation of credit.
- The UK legislation uses the concept of intermediary rather than negotiation in the exempt provisions for financial services. The critical feature of intermediary services was the bringing together of persons wanting to buy and sell financial products with a view to the provision of financial services. My findings of fact showed that the Appellant brought together brokers for the purpose of marketing leads about potential customers. The Appellant's priority was to sell leads to the highest bidder. The Appellant's interest ceased once the information was passed onto the buying broker. The Appellant's dealings with potential consumers whether electronically or in person were performed to obtain information for improving the marketability of the leads. The dealings were not entered into with a view to securing a contract for a loan. I find that the Appellant's supplies had no direct link with the process for negotiating credit arrangements between brokers and potential consumers.
- I consider the facts of the two Court of Appeal decisions in Civil Service Motoring Association Limited and BAA plc cited by the Appellant in support of its case were markedly different from the facts of this Appeal. I accept that there appears to be close parallels between the Tribunal case of Smarter Money Limited and this case. The Tribunal in Smarter Money Limited decided on the facts that the appellant's supplies were carried out with a view to the provision of credit. I have reached a different conclusion on the facts of this Appeal.
- I, therefore, make the following findings:
- The Appellant contended that its services in relation to insurance, warranties and motor breakdown insurance were exempt from VAT as being either related services for the purposes of Article 135.1(a) of the VAT Directive or as being the services of an insurance intermediary supplied in the course of his acting in an intermediary capacity for the purposes of item 4, Group 2, Schedule 9, of the VAT Act 1994.
- The Appellant considered that it met the requirements for exemption because it effected the introduction of applicants seeking insurance to a broker. Further it carried out preparatory work which facilitated the conclusion of an insurance contract. The preparatory work comprised recording the applicant's details and requirements which were then assessed against the criteria set by the buying broker.
- The Respondents submitted that in order for the Appellant to claim the exemption it had to establish each of the following requirements namely:
- According to the Respondents the Appellant was not an insurance agent or broker because it was not acting on behalf of an insurance company, and had no power to bind the company. The Appellant's preparatory work was for the purpose of selling the leads not for securing insurance contracts. Finally the Appellant's supplies did not have a sufficient nexus with insurance transactions. The Respondents concluded that the Appellant failed to meet any of the four requirements, and, therefore, was not entitled to claim exemption for its supplies.
- The VAT Directive exempted from VAT insurance and re-insurance transactions, including related services performed by insurance brokers and insurance agents. The UK legislation introduced the concept of an insurance intermediary.
- The Appellant contended that it was an insurance agent performing related services because it introduced prospective clients to insurance brokers and carried out preparatory work to bring about a contract for insurance.
- The Appellant placed reliance on the decisions in Staatssecretaris van FinanciÎn v Arthur Andersen & Co Accountants [2005] STC 508 and JCM Beheer BV –v- Staatssecretaris van Financien [2008] Case C-124/07 for its proposition that the construction of insurance agent in the VAT Directive did not require a relationship with any of the parties to the insurance contract. A finding that the Appellant introduced potential customers was sufficient to meet the definition of insurance agent.
- In my view the Appellant has adopted a partial interpretation of insurance agent as applied by the Court of Justice. In Taksatorringen) v Skatteministeriet (Case C-8/01) [2003] All ER (D) 274 (Nov),.the Court held that
- In Arthur Andersen the Court considered that the word insurance agent required an examination of the activities undertaken by the person claiming to be an agent. Further one of the key activities which characterised the work of an insurance agent was the finding of prospects and their introduction to the insurer. The factual matrix for the Arthur Andersen judgment, however, was that the Court was dealing with a private company in the Netherlands undertaking back office activities on behalf of a life insurance company. The activities included the private company taking on specific insurance risks which were binding upon the insurance company. The rationale of the Arthur Andersen judgment was based on that factual foundation which led the Court to highlight the aspects relied upon by the Appellant. The Court, however, re-affirmed existing case law which decided that a person must have a relationship with both the insurer and the insured parties in order to qualify as an insurance agent (see paragraph 33). The Advocate General at paragraph 28 of his opinion considered the decisive aspect lay in the fact that a relationship between an insurance agent and a policyholder necessarily implied the existence of an agent's own declarations, adopted as such and addressed to the policyholder before whom he presented himself as an insurance agent acting on behalf of and possibly in the name of the insurer. Although the Court in Staatssecretaris van Financien [2008] Case C – 124/07 ruled that the nature of the relationship between the agent, the insured and insurer was not limited to a specific form, it did acknowledge that there had to be a relationship of some kind between the respective parties.
- Thus I conclude from the above analysis that the construction of insurance agent and broker in the VAT Directive comprised two elements: a relationship with the insurer and the insured, and activities typically undertaken by an insurance agent.
- Although the Appellant's principal proposition was that the act of introducing was sufficient in law to satisfy the insurance agent requirement, the Appellant as a fall back position contended that it had a direct relationship with the insured. The relationship was formed when the Appellant made telephone contact with potential leads to record their personal details and insurance requirements. I consider that the construction applied by the Court of Justice required a more structured relationship than simply telephone contact with one of the parties to a potential insurance contract. The Advocate General in Arthur Andersen suggested as a minimum a relationship governed by the declarations of an agent, and one that existed with the insurer and the insured.
- The other legal limb of Article 135.1(a) was related services which required separate consideration from the meaning of insurance agent. Related services should not be confused with the test of what an insurance agent does which went towards the definition of insurance agent. The Court of Appeal in Century Life v Customs and Excise Commissioners [2001] STC 38 at 45 decided that related services meant that
- The Appellant considered that its operations of filtering and processing the insurance leads were critical to any insurance transaction brokered by a buyer of a lead. Thus its operations formed a close nexus with insurance transactions and fitted the description of related services. The Appellant's analysis was derived from the principle that the wording of article 135.1(a) did not preclude the activity of an insurance broker and agent from being broken down into separate services which would then qualify for exemption from VAT. In the Appellant's view the location of the Appellant's operations somewhere in a chain of transactions leading to a possible insurance contract was sufficient to bring its activities within the exemption from VAT. That view, however, overlooked the requirement that the Appellant's operations must still have the character of insurance services in order to qualify for the exemption (see Advocate General's opinion at paragraph 38 in CSC Financial Services).
- Ultimately this Appeal depended upon the facts of the case. The Appellant sought to persuade me that its supplies had the character of related services performed by an insurance agent or broker. In my findings of fact I decided that the Appellant's supplies were about the buying and selling of leads of prospective consumers from and to brokers. The Appellant's information gathering activities were designed to make those leads more marketable. Those activities were not about matching consumers' requirements with the most appropriate broker in order to find a suitable insurance provider. The process was driven by a price that a broker would pay for a lead, not by consumers' needs. The Appellant did not care whether prospective consumers secured insurance. The Appellant's interest ceased once the information on the lead had been passed to the buyer. The Appellant's commission was not dependent upon whether a sale of insurance was concluded or even whether the buying broker made contact with the consumer in the case of an electronic data transfer. The Appellant had no relationship with potential consumers or insurance companies. The Appellant's supplies constituted a discrete and self contained activity between brokers, which had no connection with an insurance transaction.
- I, therefore, hold that the Appellant was not an insurance agent or broker. The Appellant had no relationship with the insurer or the insured. The Appellant sold leads and did not introduce potential clients. The Appellant's supplies were not related services. Their character had nothing to do with insurance. The information gathering and sorting exercise was for the purpose of making the lead marketable not to facilitate an insurance transaction. The supplies did not form a close nexus with an insurance transaction and effectively constituted a separate deal outside any insurance negotiations.
- Turning briefly to the UK legislation which introduced concepts of "services of an insurance intermediary" and "in the course of acting in an intermediary capacity" not found in the VAT Directive. According to the notes to group 2 schedule 9 an insurance agent acts in an intermediary capacity if he is an intermediary, or one of the intermediaries, between the insured and the insurer. Further, the services of an insurance intermediary include so far as is relevant to this Appeal the bringing together of the insured and the insurer with a view to an insurance transaction or the carrying out of work preparatory to the conclusion of an insurance contract. My findings that the Appellant had no relationship with potential consumers for insurance products or insurers and that its supplies constituted a discrete and self contained activity between brokers with no connection with insurance transactions demonstrated that the Appellant did not provide the services of an insurance intermediary.
- I hold that the Appellant was not an insurance broker performing services related to insurance. Further the Appellant did not provide the services of an insurance intermediary. I, therefore, decide that the Appellant's supplies were not exempt under article 135.1(a) of the VAT Directive and item 4 group 2 schedule 9 of the VAT Act 1994.
- I have decided that the Appellant's supplies were not exempt under articles 135.1(a), (b) and (c) of the VAT Directive or under group 2 and 5 of schedule 9 of the VAT Act 1994. I, therefore, find that they are standard rated for VAT purposes. I dismiss the Appeal and make no order for costs.
20904
VAT – EXEMPT SUPPLIES –CREDIT & INSURANCE – Appellant provided an open market for the selling and buying by brokers of leads on potential customers for credit and insurance – did the Appellant's supplies constitute negotiation of credit? – no – the supplies could not be characterised as the granting or the negotiation of credit, and had no link with the negotiation of credit – did the Appellant's supplies amount to related services performed by an insurance agent or broker? – no – the Appellant was not an insurance broker or agent – the Appellants supplies had no close nexus with insurance transactions – Appeal dismissed.
MANCHESTER TRIBUNAL CENTRE
LEADX Appellant
- and -
HER MAJESTY'S REVENUE and CUSTOMS Respondents
Tribunal: MICHAEL TILDESLEY OBE (Chairman)
Sitting in public in Manchester on 12 September 2008
Nigel Gibbon, solicitor, instructed by Ruffles & Co for the Appellant
Richard Chapman instructed by the Solicitor for HM Revenue & Customs, for the Respondents
CROWN COPYRIGHT 2008
DECISION
The Appeal
The Dispute
(1) negotiation of credit for the purposes of article 135.1(b) of the VAT Directive and/or the negotiation of any other security for money for the purposes of article 135.1(c). of the VAT Directive and/or
(2) the provision of intermediary services in relation to the granting of any credit for the purposes of item 5, group 5, schedule 9 of the VAT Act 1994.
The Law
The granting and the negotiation of credit and the management of credit by the person granting it,
The negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting the credit.
For the purposes of item 5 "intermediary services" consist of bringing together, with a view to the provision of financial services?
(a) persons who are or may be seeking to receive financial services, and
(b) persons who provide financial services,
together with (in the case of financial services falling within item 1, 2, 3 or 4) the performance of work preparatory to the conclusion of contracts for the provision of those financial services, but do not include the supply of any market research, product design, advertising, promotional or similar services or the collection, collation and provision of information in connection with such activities.
"(5A) For the purposes of item 5 a person is "acting in an intermediary capacity" wherever he is acting as an intermediary, or one of the intermediaries, between?
(a) a person who provides financial services, and
(b) a person who is or may be seeking to receive financial services .
(5B) For the purposes of notes 5 and 5A "financial services" means the carrying out of any transaction falling within item 1, 2, 3, 4 or 6".
"The provision by an insurance broker or insurance agent of any of the services of an insurance intermediary in a case in which those services—
(a) are related (whether or not a contract of insurance or reinsurance] is finally concluded) to an insurance transaction or a reinsurance transaction; and
(b) are provided by that broker or agent in the course of his acting in an intermediary capacity.
(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 reinsurance;
(c) the provision of assistance in the administration and performance of such contracts, including the handling of claims;
(d) the collection of premiums.
(2) For the purposes of item 4 an insurance broker or insurance agent is acting 'in an intermediary capacity' wherever he is acting as an intermediary, or one of the intermediaries, between—
(a) a person who provides [insurance or reinsurance], and
(b) a person who is or may be seeking insurance or reinsurance or is an insured person.
(7) Item 4 does not include—
(a) the supply of any market research, product design, advertising, promotional or similar services; or
(b) the collection, collation and provision of information for use in connection with market research, product design, advertising, promotional or similar activities.
The Evidence
The Facts
"in the case of telephone transfer means where a person that is the subject of a lead consents to be transferred via the Appellant's platform to the buyer and subsequently the lead is accepted by the buyer where the buyer is connected to the lead for 45 seconds or longer, and in addition the lead type must be true and accurate as per the lead type description.
In case of data transfer of the lead, a chargeable lead is a lead which has been transferred electronically to the buyer, and confirmation of that receipt can be substantiated including the transfer of name and a contact number, the lead type must be true and accurate as per the lead type description".
Findings of Fact
Reasons for the Decision
Loans
(1) Community legislation is to be construed purposively.
(2) The rationale for the exemption of financial services is to liberate them from the tax regime transactions which, in view of their frequency and habitual nature, are a central component of the financial systems and, therefore, of the economic activities of the Member States. The aim pursued is to avoid a burden on certain services which would be liable to hamper the functioning of the market (see Advocate General's opinion at paragraph 24 in CSC Financial Services).
(3) As a general rule VAT applies to all supplies of goods and services effected for consideration. Exemptions to VAT must be construed strictly but not to the extent of reading into an exception a meaning which is not apparent from the words and from any legislative purpose.
(4) The exemption relates to the nature of the services provided, not to the person supplying or receiving those services. The specific manner in which the service was performed – electronically, automatically or manually does not affect the application of the exemption (see held (1) in Skatteministeriet.
(5) The wording of article 135 does not in principle preclude a transaction from being broken down into a number of separate services which may together amount to an exempt transaction, with each separate service benefitting from the exemption (see 23 of decision in CSC Financial Services).
(6) The only supplies that are exempted under article 135 are those whose exclusion is essential to the financial system. Neutral operations having no impact on the financial system can be taxed (see Advocate General's opinion at paragraph 25 in CSC Financial Services).
(7) The financial services exempted under article 135 are those which have the effect of transferring funds, entailing changes of a legal and financial character.
(8) Exemption can only be available for those ancillary operations which fulfil the specific, essential functions of the operations described in the provision establishing the exemption. Services merely involving the provision of information and the processing of applications for the financial product do not meet the specific pre-conditions for being regarded as serving the actual purpose of the exempt operations referred to. (see Advocate General's opinion at paragraph 38 in CSC Financial Services).
(9) Where the exemption relates to the negotiation of credit, the word negotiation does not define the principal object of the exemption laid down in the provision, but to extend the scope of the exemption to negotiation. The services provided by the negotiator must form a distinct whole fulfilling in effect the specific, essential functions of the exempt financial services. (see paragraphs 25 & 38 in CSC Financial Services).
(10) The word negotiation as used in article 135 is not defined by the VAT Directive. The Court of Justice has held that the concept of negotiation applies to the activity of an intermediary who does not occupy the position of a party to a contract relating to a financial product and whose activity amounts to something other than the provision of contractual services typically undertaken by parties to such contracts. Negotiation is in effect a service rendered to and remunerated by a contractual party as a distinct act of mediation. In that regard, the purpose of such an activity is to do all that is necessary in order for the two parties to enter into a contract without the negotiator having any interest of his own in the content of the contract. See paragraph 23 of Finanzamt Luckenwalde
(1) The nature of the Appellant's supplies had nothing to do with the granting or the negotiation of credit, and everything to do with the buying and selling of leads. They did not have the character of the financial services exempted under the VAT Directive and Schedule 9 of the VAT Act.
(2) The Appellant's contact with potential consumers for loans was for the purpose of improving the marketability of the leads. The contact had no direct links with any negotiations for credit. The Appellant's activities were discrete and outside any negotiations for credit.
(3) I hold that the Appellant's supplies in connection with leads concerning loans were not exempt under articles 135.1(b) and (c) of the VAT Directive or group 5 schedule 9 of the VAT Act 1994, and were standard rated for VAT purposes.
Insurance
(1) an insurance broker or insurance agent.
(2) providing the services of an intermediary.
(3) providing its services in the course of acting in an intermediary capacity.
(4) its services were related to an insurance transaction.
"To determine whether or not a person is an insurance agent, the essential criterion is thus not simply the nature of the internal activities he performs but, first and foremost, his position with regard to the persons that he puts into contact" (see paragraph 25 Advocate General's opinion in Arthur Andersen).
"And one does have the 'exceptions are narrow' principle to help here. Applying that, one can say that if a service is only remotely or incidentally connected with an insurance transaction it is not 'related to' it: there must also be a close nexus between the service and the insurance transaction concerned. So, for example, if an insurance agent supplies secretarial or general computer services to an insurance company, the exemption would not apply. Those services would only be incidental to insurance transactions".
Decision
MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 19 December 2008
MAN/2007/1190
Note 1 The decisions cited considered the wording of Article 13 of the Sixth Directive, which is identical with the wording of Article 135 of the VAT Directive. [Back]