WESTINSURE is considerings appealing a tax tribunal decision which will see broker networks having to charge VAT for their services.
Westinsure MD Norrie Erwin (pictured) insisted the broker network is now “considering an appeal” following a tax tribunal decision that networks must charge full UK VAT at 20%, Accountancy Age’s sister publication Insurance Age reports.
The broker network had previously maintained that, as it was providing the services of a broker, it was exempt from charging 20% VAT.
HMRC had challenged this and in 2011 issued a ruling that Westinsure should have been charging VAT since 2005.
Following a review the first tax tier tribunal has backed HMRC ruling the network was too far removed from individual insurance agreements and that its services were more like support.
In the aftermath of the decision, Mr Erwin told Insurance Age: “We are a little surprised at the judgment, we are now considering an appeal on behalf of our members.
“This has not been a situation we avoided, that’s how the model has worked for many, many years.
“We have been working with HMRC to put a case forward and now the board will make up its mind as to the correct and proper way going forward.”
Mr Erwin said he was aware of the VAT situation when Ink Underwriting Agencies completed Westinsure’s acquisition back in 2010.
He insisted: “The financial ramifications are not a major surprise – we have made provisions for this.”
Meanwhile, Les Brewin, Purple Partnership MD told Insurance Age that the network had always charged VAT.
He added: “We have always been puzzled why other networks have not charged it. I am absolutely delighted that it levels the playing field.”
Ashwin Mistry, Brokerbility chairman, insisted the ruling was not news to the network and that it remained “quite relaxed” about the decision because its network is not based on fees.
“This sector may have escaped the spotlight and it’s finally caught up – most networks are fully aware and it should not be news to any organisation,” he said.
Richard Asquith, head of VAT at professional service firm TMF Group said: “This case shows how closely the tax authorities are scrutinising services in support of brokers, and that they are looking to close off the VAT exemption.
“We can expect more of these cases as HMRC probes the limits, and looks to raise fresh revenues for the pressured Exchequer.”
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