Agents may be able to reclaim VAT on insurance commissions, following a High Court ruling against HMRC.
The court decision could allow agents who act as intermediaries recommending insurance products to claim back VAT paid on any commissions received.
HMRC has long held that this VAT exemption is only applicable where the intermediary plays an active role in negotiating the insurance, but that simply introducing a client to an insurance broker or provider was not enough and VAT should be payable on any commissions received.
However, in May this year – but only just reported – the High Court ruled on two separate cases, both involving websites.
One case involved Insurancewide, an online price comparison site, and the other related to Auto Trader. Both receive commissions from insurance providers via introductions from their respective websites and both thought they should not have to pay VAT.
The court ruled in their favour, enabling them to claim back many thousands of pounds of overpaid VAT.
Now accountants say that the same ruling will benefit estate agents who play a similar introductory role to the online sites.
Terry Dockley, head of VAT at accountants James Cowper, said: “This High Court decision has much wider implications than just for those involved in signposting insurance products online.
“Estate agents often recommend insurance providers or brokers to their clients and will often receive a commission following a purchase. This ruling means they will be able to claim back VAT charged on commissions for at least the last three years.”
A spokesman for James Cowper, a firm based in the Thames Valley, answering questions from Estate Agent Today, said: “This has been discussed at length and James Cowper has studied the ruling and taken advice. Whilst the case looked specifically at online referrals, James Cowper believes that it would equally apply if the introduction was made verbally, in writing or by any other method.”
However, HMRC has said that it will appeal this decision.
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