An introducer fee is what a UK business pays a person or firm for introducing a new client. It is set in an introducer agreement, as a fixed sum or a share of the resulting fee, and paid once the client signs or pays. There is no general licence for introducers, but introducing people for consumer credit, mortgages or investments can be a regulated activity, and solicitors and estate agents have their own rules on referral fees.
Key takeaway: Put every introducer arrangement in a written agreement that defines an introduction, the fee and when it is due. If the introduction concerns credit, a mortgage or an investment, check whether it is a regulated activity before any fee changes hands, and tell the client about the fee wherever the rules require it.
What an introducer does
An introducer puts a potential client in touch with a business and then steps back. They do not negotiate the deal, sign on the business's behalf or handle the client's money. An accountant who introduces a client to a solicitor, a web agency that sends a customer to a printer and a former client who recommends a builder are all introducers.
The role goes by several names: introducer, business introducer, referral partner or finder. Whatever the name, the rules depend on what is being introduced. Our guide to what a referral partner does covers the role in general.
What an introducer agreement should cover
- The parties: names, addresses and company numbers.
- What counts as an introduction: for example, a client named in writing who was not already in contact with the business.
- The fee: a fixed sum or a percentage, and what the percentage is calculated on.
- The trigger: signed contract, invoice issued or payment received.
- Payment terms: the deadline after the trigger, and whether the introducer sends an invoice.
- How long an introduction stays valid, so both sides know whether a client who signs months later still counts.
- Personal data: the introducer passes on a client's details only with the client's agreement.
- Disclosure: who tells the client about the fee, where the rules require it.
- Term, notice and governing law, for example the law of England and Wales, Scotland or Northern Ireland.
The referral agreement generator drafts most of these clauses from a short form. Add a disclosure clause if your sector needs one, and have the draft reviewed. For the level of the fee, our referral fee rates by industry list the ranges we observe and include a calculator.
When FCA rules apply
Under section 19 of the Financial Services and Markets Act 2000, no one may carry on a regulated activity in the UK unless they are authorised or exempt (FSMA, section 19). Whether an introduction is regulated depends on the product. Three cases come up often.
Consumer credit
Introducing an individual who wants credit to a lender, or to a credit broker, is credit broking, which article 36A of the Regulated Activities Order lists as a regulated activity (article 36A). Apart from narrow exclusions, the introducer then needs FCA authorisation or must act as the appointed representative of an authorised firm. Credit brokers must also tell the customer, in good time before the agreement, about any commission from the lender that could affect their impartiality or the customer's decision (FCA Handbook, CONC 4.5.3R).
Mortgages
Introducing a client to an authorised mortgage firm can fall outside the regulated activity of arranging, under article 33A of the Regulated Activities Order, when two conditions are met. The introducer must not receive money from the client for the transaction, other than money payable to the introducer on their own account, and before making the introduction must tell the client about any fee or commission the firm will pay them (article 33A).
Investments
In the course of business, only an authorised person may communicate an invitation or inducement to engage in investment activity, unless an authorised person has approved the content or an exemption applies (FSMA, section 21). An authorised firm can appoint an introducer as an introducer appointed representative, whose role is limited to effecting introductions to the firm and distributing its non-real-time financial promotions. That role excludes advising on investments and arranging deals (FCA Handbook, SUP 12.2.8G).
Before you introduce clients to a financial firm, check the firm on the FCA Register and ask it in writing whether your role needs an appointment.
Solicitors, estate agents and personal injury claims
- Solicitors: when a third party introduces business to a solicitor or shares fees with them, the SRA Code of Conduct requires that clients are told about the introducer's financial interest and about any fee sharing arrangement relevant to their matter, that the fee sharing agreement is in writing, and that no referral payments are made for clients who are the subject of criminal proceedings (SRA Code of Conduct for Solicitors, paragraph 5.1).
- Personal injury: in England and Wales, section 56 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 bans regulated persons, such as solicitors, from paying or receiving referral fees for personal injury claims (LASPO 2012, section 56).
- Estate agents: 2019 guidance from the National Trading Standards Estate Agency Team says agents should disclose in writing any referral arrangement, who it is with, and the amount of any transaction-specific referral fee (NTSEAT guidance).
Tax and VAT, in general terms
An introducer fee is taxable for the person who receives it. When introducing is part of a self-employed business or a company's trade, the fee is part of that business's income. When it is occasional, HMRC's helpsheet on other taxable income gives commission as an example of miscellaneous income (HMRC helpsheet HS325).
Individuals have a trading allowance: up to £1,000 a year of trading and miscellaneous income is exempt, and above that amount you must tell HMRC (HMRC guidance on the trading allowance).
VAT is added to most products and services sold by VAT-registered businesses (how VAT works), and registration is compulsory once taxable turnover over the last 12 months goes over £90,000 (register for VAT). Some introductions are exempt. HMRC says commission for introducing customers to finance houses that provide them with credit is exempt when you act as an intermediary (VAT Notice 701/49), and insurance brokers and agents acting as intermediaries can exempt introductory services (VAT Notice 701/36). Both notices set conditions, so check them or ask an accountant before you invoice without VAT.
If you pay introducer fees, keep the invoice or a statement for each payment with your accounts.
Frequently asked questions
Do I need FCA authorisation to be an introducer?
Only if what you do is a regulated activity or involves communicating a financial promotion. Introducing individuals to lenders for consumer credit is credit broking, which needs authorisation or appointed representative status. Mortgage introductions can stay outside regulation if you meet the conditions of article 33A of the Regulated Activities Order, and investment firms can appoint introducers as introducer appointed representatives.
What is an introducer appointed representative?
An appointed representative of an FCA authorised firm whose role is limited to effecting introductions to that firm and distributing its non-real-time financial promotions. It cannot advise on investments or arrange deals, and it needs a contract with each firm it works for.
Do clients have to be told about an introducer fee?
In several areas, yes. Credit brokers must disclose lender commission that could affect their impartiality or the customer's decision, mortgage introducers relying on article 33A must disclose their fee before the introduction, solicitors must tell clients about an introducer's financial interest, and estate agents are expected to disclose referral fees. Elsewhere, telling the client is still good practice.
Is an introducer fee subject to VAT?
If the introducer is VAT registered, VAT normally applies to the fee unless an exemption covers it. HMRC treats some introductions in finance and insurance as exempt intermediary services, under conditions set out in VAT Notices 701/49 and 701/36.
Do I pay tax on a one-off introducer fee?
Yes, it is taxable income. HMRC gives commission as an example of miscellaneous income, and individuals can set it against the £1,000 trading allowance. Above £1,000 of such income in a year, you must tell HMRC.
How much is a typical introducer fee?
No official scale exists. The two parties negotiate it, as a fixed sum or as a percentage of the first invoice or of the deal. Our referral fee rates by industry list the ranges we observe, with a calculator.
This page gives general information about UK rules and is not legal, regulatory or tax advice. Check your situation with a solicitor or an accountant before you pay or accept an introducer fee.