VAT Services for Insurance Providers

Whilst insurance transactions are exempt from VAT, output tax may be due on some insurance-related services and therefore insurance providers must take steps to ensure they are  aware of their VAT  responsibilities and remain compliant with the relevant VAT legislation. 

As an authorised insurance provider, all transactions related to the provision of insurance are VAT exempt. In fact, certain additional services are considered as insurance for the purposes of VAT exemption, whether they are delivered by an authorised insurance provider or not. For example, certain funeral plan contracts or vehicle breakdown cover can be seen as insurance even if they are delivered by providers that are not authorised (or have benefitted from an exemption from the need to be authorised). As such, they are not liable for VAT.

Any VAT due on insurance-related services is due where the services are consumed, not where they are supplied. However, the country where the services are supplied can still determine whether or not you can recover VAT on any costs related to supplying insurance or related services.

These regulations can be difficult for businesses to navigate, but legal compliance is of utmost importance. At The VAT People, we have significant experience advising insurance providers of their specific obligations, and helping them to claim back VAT wherever possible.

We have helped many insurance businesses to understand their VAT responsibilities and are happy to answer questions or offer advice. Contact The VAT People by calling us on 0161 477 6600, or fill out an online enquiry form to request a call back at your convenience.

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FAQs

Where is VAT due if an insurer supplies repair services to a customer in another country?

Under normal circumstances, if an insured party makes a claim for damage to goods covered by their policy, any repair services are deemed to have been supplied to the insured party and the insurer will cover any costs.

However, some insurance providers specify in their contracts that they will manage repair work for the goods. In this instance, they will be the recipient of any repair services required from a legal perspective. Previously, VAT was payable where insurance-related services were supplied, which meant that insurance providers could establish headquarters in countries with low VAT rates, and benefit from these when managing repair services in the UK. 

However, VAT is now due where the service is consumed, meaning goods repaired for people living in the UK will be chargeable to UK VAT (irrespective of where the insurer commissioning the work is located).