Are you a financial intermediary?

Have you wrongly charged VAT on your lead generation services?

A recent VAT case, Performance Leads Ltd v HMRC [2025] UKFTT 660 (TC), has found in favour of the taxpayer that lead generation services supplied to Independent Financial Advisors (IFAs) qualified for VAT exemption as financial intermediary services.

Given that IFAs can recover very little, if any, of the VAT they incur, this presents an opportunity for suppliers and recipients of such services to make sure that VAT costs are not incorrectly arising.

The case

Performance Leads (PL) operated two websites that collected information from individuals seeking financial advice. This information (the "leads") was then passed on to IFAs, who paid PL a fee per lead, with the obvious intention that the IFAs can then provide financial services to those individuals.

PL originally accounted for VAT on its lead generation services but subsequently sought a repayment of this VAT on the basis the services fell within exemption for financial intermediary services. HMRC disagreed arguing that the services were more akin to advertising and that not all the conditions for financial intermediation were met; specifically, that the level of data gathered by PL was not enough to amount to meet the legal requirement of “work preparatory to the conclusion of contracts”.

The decision

The First-tier Tribunal (FTT) disagreed with HMRC, finding that PL’s services should benefit from exemption. They concluded that:

PL’s services did qualify as exempt intermediary services under the VAT Act 1994, Schedule nine, Group five, Item five
although PL was not negotiating or concluding contracts, it was assessing and filtering leads, which constituted more than just a passive conduit or advertising service
the tribunal emphasized that PL’s “sift” process, which evaluated the suitability of leads, was a meaningful activity that met the conditions for VAT exemption for intermediary services.

In a strong judgment in favour of the taxpayer, the tribunal found that: “PL therefore was doing enough- in our view, easily enough, to ‘cross the line’ from being a mere conduit or advertiser into being an intermediary introducing the sort of person from who IFAs might be able to make money; that is to say, exactly the sort of people whom IFAs were looking for."

As a tax technical aside, the decision included a helpful overview of recent VAT case-law in this area and the legal principles that establish when exemption is applicable, and therefore, when it is not.

Application to others

The decision of the tax tribunal is only binding on the parties, but, taken together with earlier case-law, some of which is from senior courts that does create legal precedent, it nonetheless provides a clear steer of how the services of similar lead generation businesses should be taxed.

If a business has accounted for VAT on its lead generation services it should review whether that VAT was correctly charged. IFAs purchasing such services are unlikely to have been able to reclaim the VAT so unexpected VAT costs may arise. The lead generation businesses should be aware that if their services are VAT exempt, they will need to restrict the recovery of VAT they incur on their purchases.

Read our insight for guidance on the application of the exemption for financial intermediary services.

For more information on the application of the VAT exemption for financial intermediaries and how it may apply to your business, please contact Robert Marchant, or your usual Crowe contact.