Westinsure considering appeal over membership fee VAT

Westinsure is considering appealing against a ruling by the First Tier Tax Tribunal that would force the network to charge VAT on membership fees.

In 2011, Revenue & Customs (HMRC) said broker networks should charge VAT on fees, backdated to 2005. But Westinsure disputed the decision. It said that it provided the services of a broker or agent, which are VAT-exempt. HMRC’s view was that Westinsure provided a marketing and promotion service, and should pay VAT.

But the tribunal ruled yesterday that Westinsure was too far removed from individual insurance agreements to be a broker or agents and that its services were closer to support services.

The Giles-owned broker network had already put aside cash in escrow to pay the backdated tax in case it lost the case. The cost is likely to be between £268,000 and £400,000, according to the firm’s accounts ending in August 2011.

Westinsure managing director Norrie Erwin said that the company board would meet to consider appealing against the decision.

Erwin played down the cost to Westinsure and its members. He said: “The issue is important, but the financials attached to it are relatively modest.

“Our model is quite a low-cost model. Our members don’t pay exorbitant fees; they’re pretty modest.”

HMRC will want to reclaim the backdated VAT, according to TMF Group head of VAT & IPT Richard Asquith.

Asquith 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.”