BIM40690 | Specific receipts: insurance and other commission: fact finding

The correct treatment does depend on the exact facts. The first step is to establish the precise terms under which the commission is paid. It will be necessary to examine the agreement (and any other relevant documentation) between the agent and each insurance etc company involved. It is sometimes the case that the documentation does not cover all the arrangements between insurer and agent. It will usually be advisable to meet with the agent and his or her advisers in order to establish what further arrangements, if any, that there are in practice.

Money received ’up-front’ may be described as a ’loan’ (or ’advance’), as against an advance payment of commission. If, in fact, that is its true character then it is not a trading receipt even though it is repaid subsequently by set-off against commission falling due.

A loan will normally be a round sum (or sums) paid when the agency commences and/or at fixed intervals thereafter. Since the purpose of a loan will normally be to enable the agent to meet personal expenses in the initial period when the agency is being built up, one would expect the amounts to be based on personal need, not on the amount of business introduced.