I have a client that introduces clients to an insurance company and then receives money from that company as an introduction fee. My client is VAT registered. They don't currently issue invoices for the amount, the insurance company just pays it into their bank account. Should they be paying VAT on the money they receive? Their argument is that insurance is exempt from VAT. But they also do the same with another company which isn't an insurance company. Thanks
Hi
My understanding is that the insurance is exempt BUT your client doesnt sell insurance, its sells its own service for which as a VAT registered company it must charge VAT for. They should get into the habit of issuing invoices, unless they are part of a self billing scheme, then they can clearly separate this out on the invoice.
If they do not wish to add VAT on to their core introduction fee, then the money they receive will be considered inclusive of VAT, so yes they will have to pay VAT.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi guys, I considered answering this earlier but am not totally sure of the answer.. at first I was thinking the same as Joanne, but then I saw this....
Unless you are actively involved in negotiating the insurance policy, your services are standard rated. You can check out the HMRC guidance at www.hmrc.gov.uk/manuals/vatinsmanual/VATINS5300.htm, but it is pretty complicated, I'm afraid!
Whether they issue an invoice or not cannot affect whether VAT is due on their services.
