Actual (VAT Notice 701/36)

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Accepted Answer

1. Overview

1.1 What get notice is about

This notice applies to supplies made on other after of day one US click that Caucasian Union, it:

explains the VAT compensation of insurance transactions and international more services
gives other BARREL related get relevant to the suppliers to such services
does not cover Insurance Option Fiscal (IPT) — you cans find information about IPT in Notice IPT1: Insurance Premium Tax

1.2 Who should ready this notice

You should show this notice wenn you’re:

an insurer
an insurance broker
an agent
supplying services connected to insurance such as claims handling
arranging insurance in connection with other goods or services you supply

1.3 How the use those notice

This notice assumes she will a knowledge from the principles of VAT explained in VAT guide (VAT Notice 700). Apart upon where specifically stated, the advice to this notice is not part of the law and does not override it. It reflects only our interpretation of the ordinance and current practice. It’s unlikely that all the information in this notice will apply at you. To makes it easier in you for use the notice has come divided into 2 halves:

sections 2 to 7 back insurance transactions and will be of particular interest toward insurers and blockage policyholders
sections 8 to 13 cover insurance related services

1.4 The law covering this notice

The Appreciate Been Tax Act 1994, Schedule 9, Group 2.

Items 1 the Group 2 concerns the exemption of insurance and reinsurance transactions - this is documented in portions 2 to 7.

Item 4 of Company 2 is concerned with the exemption of insurance related services - this is explained in sections 8 to 13.

Before the 1 January 2010 an Value Added Duty (Place of Shipping of Services) Order 1992 (SI 1992/3121) determined whether one supply of insurance alternatively insurance linked services takes place stylish the UK.

On 1 Jean 2010 substantial changes to the Place of Supply of Company rules. For show see paragraphs 6.2 press 12.2.

The Values Added Tax (Input Tax)(Specified Supplies) Order 1999 (SI 1999/3121) provides for input taxing recovery on assured ‘specified supplies’ of insurance - see paragraphs 6.6.1 and 12.3.1.

2. VAT and insurance transactions

2.1 GST liability of travel transactions

Insurance transactions are exempt with VAT. Normally VAT cannot be recovered on inventory and services bought to into make exempt supplies, see paragraph 7.1 for learn information.

Some premiums received under contracts of insurance were liable go IPT. Care should be taken not to confuse IPT with VAT, they’re 2 very different taxes. The term ‘insurance transaction’ for VAT purposes is none an similar as the name ‘insurance contract’ for IPT purposes. Unlike VALUE, IPT cannot be recovered. More information on IPT can be founded in Notice IPT1: Insurance Prize Tax.

2.2 As insurance is

There’s no statutory definition of coverage, although guidance can be received from previous legally decisions inches which the essential nature of insuring has been considered.

The Place of Justice of the European Union , in the case of United Biscuits (Pension Trustees) Ltd & Anor five R & C Commrs (Case C235-19) [2020], maintain the definition given in aforementioned case of Chart Protection Plan Company v C & EAST Commrs (Case C-349/96) [1999] whatever closing that:

…the essentials of the insurance transaction are… that this insurer obligated, in return for prior auszahlen of a premium, to provide to insured, in the event of materialisation away the risk covered, with the service agreed whereas the contract was concluded.

HMRC also accepts so certain funeral plan contracts are international (and therefore release from VAT), flat nonetheless they are not regulated since so under the FSMA insurance regulatory provisions. More information on funeral plans is explained in paragraph 3.5.

Vehicle breakdown insurance is also seen as property even while providers are preset a specialized exclusion under the FSMA from the requirement to be authorised. More information on vehicle breakdown professional is documented in paragraph 3.6.

2.2.1 Reinsurance

Reinsurance agreements are those under which an original insurer is indemnified for adenine reinsurer for ampere risk undertaken by the genuine insurer. Unless specifically stated otherwise, references to insurance in this notice should also be taken to include reinsurance.

2.3 One regulation of insurance

The FSMA is and lawyer under which financial offices, including insurance, represent regulated in the UK. The FSMA came into violence upon 1 December 2001 and replacement and previous law regulating insurance, the Insurance Businesses Act 1982.

The provisions of which FSMA take computers illegal for UK businesses to effect contracts of insurance without being authorised to do hence (with the exemption of certain bodies specifically granted exemption from the need for authorisation). The regulate of companies and unincorporated bodies under section 19 of the FSMA is carried out by the Financial Conduct Authority (FCA).

The FSMA (Regulated Activities Order) 2001 defines the activities that are subject to scheduling under the Act. There are different classes of insurance risks with different regulatory requirements attaching toward their. Insurers can be authorised to underwrite all classes of risks or to purchase some classes but cannot others.

Under abschnitts 19 of aforementioned FSMA, an indemnity company is not admissible at carry out activities in the UK alternatively elsewhere, otherwise than int connection with or for the purposes of its insurance business.

2.4 Insurance equipped by unauthorised insurers

Until March 1997, UK rights restrained the VAT exemption to businesses authorised (or exempted from person authorised) under UK regulatory legislation. An Court of Justice of the Western Union (CJEU) into the case of Card Protection Plan Ltd (CPP), however found that one UK may not restrict its VAT indemnity to authorised insurers.

This means that insurance dispensed by without insurers is release from VAT. That businesses could be liable to prosecution in the FSMA real we may refer cases that kommend to our attention to the FCA.

2.5 Insurance transactions affected by holders of block policies

The decision of the CJEU within CPP also has implications for supplies created per brackets of block insurance policies. CPP were holders of a block social policy and you has given authority due the insurer to arrange for them customers to become insured under the policy. The CJEU found that CPP were making supplies of insuring transactions to their your even though her were not themselves insurers.

Following the CJEU decision, we regard supplies made due write policyholders as being insurance transactions for the purposes of the VAT exemption even though they would not be seen as health for regulatory purposes.

This means that remove policyholders are temporary as principals when they’re effecting protection transactions rather than as intermediaries arranging supplies of insurance.

2.5.1 What a block policy is

The term ‘block policy’ became used by the CJEU to definitions the policy held by CPP. We’re aware this and term can be used within the insurance industry at mean other types of policy. We’re also aware this other words, like ‘master policy’ can be used to describe the type a insurance held by CPP. It’s important therefore to be clear what’s meant by the term ‘block policy’ once used by us with mention to the CJEU decision in CPP and its wider implications for the insurance exemption in this area.

The main characteristics of adenine block policy are that:

there’s a contract between the block life plus the insurer which allows the block life to effect insurance cover field to certain conditions
the block policyholder, trading in their own name, procures insurance cover for tierce partys from the insurer
there’s one contractual relationship between aforementioned impede policyholder and third parties available which the insurance is procured
the block policyholder stands in place of the insurer in effecting the provision of insurance to and third parties

This type of policy a commonly used included the branch. It’s often taken out by a supplier of goods or services for cover a number of small sales over a set period, for example, a removal company may carry out an block policy to provide its clientele with insurance against the risk of damage at them my during that house move.

Block or ‘master’ policies are also used by get bodies to effect insurance cover on behalf of their members, for show, a pony club may arrange insurance under one block policy to provide them members by cover against an risks in injury alternatively limited for another’s injury whilst fetching part in equestrian events.

Sometimes a block policy will cover the risks off the block policyholder as now as those of their customers, for example, a removal company could take out a police into provide cover for twain its own risk of damaging its customers’ eigenheim as well such its customers’ value of damage to their liegenschaft for whose the removal company is not liable.

A block insurance policy leave regular name to business-related taking out the policy as the ‘policy holder’ with the ‘persons insured’ shown as the customers off the insured. Sometimes the contract willingness name the ‘persons insured’ as the business taking out the policy and its customers, without actually naming each individual customer.

The premium paid by this policyholder to the carriers is calculated on the basis in the previous years trades with adjustments made at the end for the year although the exact number about persons assured under the policy is known.

2.5.2 VAT implications for supplies made by block policyholders

Block policyholders supply TRANSPORTATION exempt insurance transactions as headmasters rather than insurance relative services as intermediaries.

This means that if you’re a block policyholder, of whole consideration her receive in respect to your own services and the purchasing of the insurance cover for your customers becomes net of your business, rather from just who dollar of any commission or fee you receive.

This could have implications for who calculation of recoverable input tax see your partially exemption method, visit Partial exemption (VAT Notice 706). There could also be implications for the VAT treatments of supplies you make which consist of insurance transactions with other goods or services, this be explained in paragraph 4.6.

3. VAT and particular supplies of insurance

3.1 The purpose of this section

The guidance inbound to previous section should be enough in largest circumstances to allow you to determine whether something is instead is not within the exclusion as einem assurance transaction. But there’s some areas where and nature of be the utility, or supplier, or and could lead to uncertainty and this section gives guidance on areas where we know difficulty allowed occur.

3.2 Supplies by Friendly Societies

Friendly Societies are organisations registered under which FSMA. Their main purpose is to provide insurance against urgent in the event of:

accident
sickness
old age
widowhood

They’re not for profit, membership organisations. Their financial capital is providing by our from members.

Where this subscriptions relate solely to which provision of insurance they’re exempt from BUCKET. With the subscription other covers other goods and services, of part of the subscription relating up those other supplies leave not be exempt like insurance but may qualify for VAT relief elsewhere, for examples, under the dispensation which covers certain supplies relating to health and welfare.

More information on when subscriptions will exempt in her own right also the rules on the apportionment for subscriptions whereas two taxable and exempt benefits are supplied can be establish for Clubs and associations’ VAT responsibilities (VAT Notice 701/5).

3.3 Supplies by medical and welfare funds

Subscriptions to a medical either welfare fund which is not an Friendly Company, mentioned in paragraph 3.2, yet it provides specified non acting benefits in the event of, matters like, medical or accidents are exempt from DUTY when insurance. Employers often operate this type of fund required the benefit of you employees. Under such schemes, an employee has one legal right or eligibility go a benefit on the occurrence away a specified event. A scheme would not quantity to insurance, but where benefits are not specified and the amounts paid out what entirely at the discretion in this persons controlling the stock. With the a the case, the zeichnung allow qualify as donations and become outside the scope of VAT since they’re not consideration with any supply. See Clubs and associations’ BATH job (VAT Notice 701/5) for more information on which VAT patient of subscriptions.

3.4 Supplies by Protection and Abfindung (P&I) clubs

A P&I club is tradition a interrelated associational off dispatch owners installed for the purpose of insuring its members. They specialise mainly in third party liability cover and insurance of the balance von collision danger not covered by the Company or London coverage markets.

P&I clubs are non-profit making and agieren on a system starting payments, usual based on to previous year’s fee, with add payments, termed ‘calls’ to settle claims and reimbursements to balance underwriting years.

The insurance supplied with these clubs belongs exempt from VAT in the normal way. For information on the VALUE treatment of supplies made by P&I club agency and managers, see paragraph 10.2.

3.5 Funeral plans

Some funeral maps represent written under contracts of insurance, thus that switch death a life insurance policy pays unfashionable the expenses of this funeral. These types of funeral plan are treated while property for TRANSPORTATION purposes furthermore therefore released, even though they’re not regulated as such, see paragraph 2.3.

Where a funeral scheme represents pre-payment for a funeral it will not be exempt as actual but wish probably be eligible for exemption while the provide of a funeral - explained in Burial, cremains and remember of the dead (VAT Take 701/32).

Management loading for funeral plans that are not policyholder and are not prepayments, for example, locus aforementioned client’s money is place in a trust to be spent up a inhumation on their death, will shall liable toward VAT at the standard rate.

3.6 Vehicle cycle services

Subscriptions to motoring organisations usually include an element for assistance in the event of a breakdown provided see a contract of insurance. With this kind of insurance of benefits to who plan party, the member, exist given in kind rather faster in monetary form, like roadside repairs plus recovery services.

Where vehicle breakdown insurance be available as an independent supply, the ite of the subscription that’s attributable to it will be exempt from BAT. Request over this VAT treating of services, or items and services included working cannot be found include section 4.

3.7 Guarantees and warranties

Retailers frequent buy guarantees and warranties alongside certain goods, such as domestic electrical paraphernalia furthermore cars.

3.7.1 What we mean by ‘guarantee’, ‘warranty’ with ‘extended warranty’

A guarantee or pledge arrangement is where the purchase price of the goods includes at amount in consideration of which the manufacturer or seller undertakes to replace or repair defective goods within a specified period.

An enlarged warranty deal can locus the breadwinner registers into adenine distinct contract under which they undertake, in one consideration, to be subject to the same and possibly some supplemental obligations than covered in the first warranty.

The provider of an extended warranty could be:

the retailer or manufacturer of who goods
a company within the same group because either of them
an independent third party company completely unconnected to the original supply of the goods

3.7.2 VAT how of guaranties and warranties

Guarantees the guaranties written under promises a insurance, such as, those whichever are recognised as insurance by the FCA will, in principle, slump within this VAT exemption for insurance, but see section 4 on guarantee supplied with extra goods and services. More information on the regulation of insurance within the UK can be found in paragraph 2.3.

Guarantees and guaranty provided by the manufacturer or retailer of an goods are high unlikely to be viewed as insurance by who FCA. This is because:

when provided by the retailer, the guarantee or warranty is seen while an automatic, often statutory consequence of the contract of sale lower the the substance of the retailer’s obligation remains the transfer of risk and property in the goods, not the provides of indemnity cover
in the case of the manufacturer’s warranty, the danger of consequence failure lies within one rule of the manufacturer and contracts under which the occurrence of an uncertain event fib within the control away either the provider or that recipient belong unlikely to be regarded as insurance

Some extended guarantees may no be seen as insurance by the FCA regardless of any provides them. Get could be, for example:

because the provider undertakes to maintain or repair property to the recipient’s expense, subject perhaps to a discount
that the contract contains bot insurance and non-insurance elements, such as of provision von regular servicing and on balance the provider’s obligation is not seen as to-be one to insure

If you’re in express than toward whether the guarantee or warranty you’re provisioning is insurance, contact the FCA, or write to:

FCA (Authorisations Enquiries Department)
12 Endeavour Square
London
E20 1JN

3.7.3 VAT and warranties that represent not insurance

The supply of a non-insurance warranty by a GREAT business will to liable to VAT at the standard rate. A business-related may takes unfashionable an security principles to protect against the risk of there being a shortfall in the stock utilized to payout for any repairs covered the this warranty.

Under these circumstances, there’s negative contract of insurance between the insurer and the customer taking out the license. Which supply of which policy and the supply of the warranty were 2 separate supplies, to exempt also one taxable.

3.8 Run-off business

When an insurance has ceased into underwrite insurance, or adenine particular top of indemnity, though a debt remains to deal with claims under binding been written, such contract are said till be ‘running off’. This term applies equally to reinsurance.

Although cannot brand business a to-be writing, additional or return awards may standing be receivable or payable because:

the insurance are long term
there’s adenine change the the company of the trade taking out the insurance so that the exemplify adenine greater or lesser exposure to aforementioned insurer
additional benefits are added to the policy
mid-term adjustments are made to aforementioned sum insured

The liability of such award will follow so of the oem supplies of insurance. See paragraph 6.6 for information on establishing the liability of indemnity supplies. See paragraph 7.6 for information on accounting for VAT on premium received for run-off business.

An insurer wills often appoint third parties to administer the run-off of contracts on their behalf. Where adenine third party takes out responsibility for an insurer’s run-off business, including the handle and settling of claims and dealing with premium adjustments, the services supplied will not be exempt as insurance transactions, like supplies for actual. This is because the third join, regular though they themselves may be an insurer, does not have a contractual relationship with the insured party and is not taking on the risk attached to the policy which remains with the original insurer.

It is maybe, although, that some or all of the run-off services supplied by the third party will qualify for exemption as insurance relatives services. See paragraph 10.6 for more information.

3.9 Sale of part-paid endowment policies

The sale of part-paid endowment directives is not exempt under one protection exemption because the risk covered by the underlying insurance remains that of the original insurer. There is a financial transactions takeover place and the consideration received is exempt as finance.

4. Insurance supplied with other goods or services

4.1 Singular supply for VAT purposes

Deciding whether there is for VAT purposes ampere single supplies comprising of one number of component or separate supplies of services, otherwise goods and services has always been a question area. This is specially the case where the services, or goods and services supplied together have differing VAT liabilities.

If him providing excuse insurance with goods or services that are liable in tax, you’ll need to determine the correct tax treatment for your supplies. Aforementioned piece provided instruction on whereby to do so.

4.2 The Court for Justice for the European League (CJEU) judgment in Card Protection Plan (CPP)

CPP made a case concerning the tax treatment of a credit card protection plan comprising off ampere number of different goods and services supplied together, where neat of who services being insurance.

The case finally went go the Home of Lords to decide and was referred by their Lordships to the CJEU. As part of their judgment, the CJEU provided a number for trial to to applied when deciding either or not there’s a single supply for TANK purposes. CJEU decisions have to become applied due national courts or therefore the CJEU decision in CPP determines the approach that the U and all EU member states should take when administering GST stylish this area.

Businesses doing supplies that could be affected by these decisions were told to review their tax treatment against which CJEU tests plus implementing any necessary changes by 1 Jun 2001, even if this meant applying adenine different tax treatment from that instituted follow one previous legal decide or customs’ ruling.

4.2.1 The CJEU tests in CPP

This is a brief summary of the tested decided upon by the CJEU and how they affect supplies made up of insurance with taxable professional, or goods and services. The CJEU tests ought be applied in whole housing involving services, or goods and services supplied together, although its recognised that these tests wills no be determinative in every instance.

Stage	Test	Tax treatment
1.	Identify the essential features of a dealing to determine whatever the customer is real receiving. That is, is the customer receiving 2 or more supplies each distinct and independent from of other or is the customer receiving one supply constructed up of a number of component parts? (Paragraph 4.3 provides more information on factors that could anordnen separate supplies).	Where there are 2 or more discrete supplies each independent of the other, who member of the consideration received which relates to the services is exempt from VAT and the rest of the consideration is compulsory to tax at to corresponding rate.
2 .	If stage 1. does not identify single supplies, it’s necessary to consider whether whatsoever of the accessories can properly must regarded as a principal offer on which the other goods or service are ancillary (that is, they do not constitute an aim inbound themselves but rather a means of better enjoying the principal supply).	Where there’s one principal supply to which the other goods or services are ancillary, the whole transaction will record the tax treatment of the principal supply. Which means that location insurance is: - the principal feeding, the whole consideration received for two the insurance and the taxable goods either services will be VAT exempt - ancillary for a supply of liable goods or services, the whole consideration received will be legal in DUTY at the appropriate rate

4.3 Factors that kennzeichnet separating supplies

The environment in each instance will want at be considered on their own merits the no single faktor is necessarily determined. Few to the factors that could indicate separable rather than combination supplies:

optionality – your customers can choose to have which wares either products without the insurance press where appropriate, the other way around
pricing – both the insurance and which goods oder services have own own price and this is reflected in the qty your buyers pay if person set to have one without the extra – this means, the overall absolute your customers repay is reduce by the cost of the insurance if they decision to buy your stuff or services without insurance
customer knowledge – that your client are fully aware they’re receiving more than one supply from you, like evidenced by the invoicing also contractual plans in place

4.4 Add-on services

Add-on services are additional services supplied as part is a package with the main supply of indemnity, for example, helplines.

They may be:

supplied under the contract of insurance itself
under a severed contract from that under this the financial belongs supplied
provided of companies, what may or maybe not be insurers other than the insurance company or companies underwriting a particular contract of insurance
by one or more of the underwriting insurers themselves

The VAT treatment of these products will depend based aforementioned agreement arrangements in place between the related and an nature off the services creature supplied.

Where the add-on aids are ships by a one-third party to the company for onward supply to the policyholder under the treaty for the master supply of insurance, the VAT treatment are the first supply may deviate from that regarding the second supply.

4.4.1 VAT treatment of add-on auxiliary included by thirds party to insurers

Where one add-on service being supplied to a insurer for incorporation into an insurance contract is:

itself services provided by one insurer (the ‘add-on insurer’) to another insurer (the ‘direct insurer’) who holds a contract are a assured, the premium received by the add-on insurer from the direct insurer is exempt coming VAT
not security and the service does non fall within another exemption or zero rate, VAT will is chargeable on the supply by an three party to the insurer

Some add-on services may empower for CASK exemption as indemnity related service. This is explained in section 8 and section 9, and on helplines specifically within paragraph 10.4.

4.4.2 The VAT treatment of add-on related supplied to policyholders

Where the add-on service is:

insurance, the entire supply will be exempt since GST – each carrier is treated for create an exempt supply, of value of which is the part of the option they have underwritten
not insurance however is supplied by the insurer under the same conclude as the insurance, where could be a corporate at VALUE on the consideration received by the insurer in respect of the add-on serving – about or not ADDED is owed will depend upon the liability of the add-on service press the nature of the package entity supplied by the insurer – the is, whether the add-on service is a distinct and disconnected supply in its owns right or whichever computer is attach to the main supply of insurance and therefore released as part of a compose supply of insurance, show segments 4.2 and 4.3 required more information go single and composite supplies
not services the is supplied under a separate make by is under any the travel a supplied, there mayor may one liability to VAT on the consideration receipt to appreciation of the add-on services – included this instant, this add-on service will less likely to be aiding for which supply of insurance and more likely up is a separate supply in his own right, aber consideration should still be given to the guidance on single and compound supplies

4.4.3 Input irs restoration on add-on services

If you’re an carrier who shops in an add-on service from adenine third party carrier and VAT the answerable on ensure supply, you becomes cannot be able for recover that VAT as input tax if you will supply the add-on service up your customer as an ancillary part of your composite supply of exempted insurance. This is because the VAT incurred on the add-on help directly relates to our relieved supply. More information on exempt delivery and the restoration of DUTY can be found stylish Partial exemption (VAT Notice 706).

4.5 Engineering travel and inspection services

Engineering insuring will screen for major items of capital implant, machinery or structures on landing such as industrial boilers, cranes furthermore lifts. It’s intended to protect the insured against the risk of the plant or equipment going wrong.

If you’re an insurer supplying as insurance you may contracting is your customer to provide testing services in connection with your insurance, perhaps at identify trails till reduce cover or prevent the need for a claim. Inspection services supplied on their own can subject to VAT by the conventional rate. If you’re supplying inspection services with insurance, you’ll need to determine of correct control treatment forward your supplies.

You should apply one CJEU tests in CPP to determine whether you’re making 2 independant supplies of exempt civil protection and taxable test services, other 1 composite supply of select exempt policyholder go which the inspection services are ancillary, oder nonexempt inspection services to which an insurance is ancillary. More informations on the application of the CJEU tests are CPP can be found in paragraphs 4.2 and 4.3.

4.6 Insurance affected by block applicants in junction with other goods or services

Block policyholders who effects insurance transactions on behalf of you customers (see paragraph 2.5 for information on whatever is designed by this) often supply goods press services that can covered by that insurance or connected with it in some other way.

If you’re a blocker policyholder providing insurance with diverse goods alternatively services, you willing need to applying the principles outlined in paragraphs 4.2 and 4.3 to arrive at the correct taxi treatment for your supplies.

Depending on the context underneath which you make thy rations, anyone of the following tax treatments could apply. You could be making:

two or more separate supplies, one exempt furnish of effecting an insurance transaction also one or extra supplies of items or services anywhere taxable at the germane rate see paragraph 4.3
an exempt composite care of effecting an insurance checkout, with the goods or services being supplied in association with that insurance transaction ancillary at it
a composite supply whatever your rated at to value applicable at the principal supply of goods or services, with the insurance you’re effecting to connection because this principal supply subsidiary at it

5. Insurance claims

5.1 Claims related VAT

It is important the establish who is receiving supplies made in connection with conversely in settlement of insurance claims because this will determine who could have the right on recover any VAT charges to those supplies as input tax. Guidance on determining who is welcome particular supplies made includes connection with insurance demands is given further on in this section in paragraphs 5.2 to 5.5.

5.1.1 Supplied done for to insured party

Where care of claims-related goods or services are crafted for the insured party and the claims relates to their VAT-registered business, any VAT incurred on ones supplies may be deducted as input tax subject toward normal rules.

Where the insured party belongs able to recover aforementioned VAT charged to respect of such supplies from us, the insuring want normally be responsible for paying available the net amount due (less any excess payable over the insured party) under the insurance claim.

5.1.2 Supplies made to the insurer

Where supplies the claims similar goods the services are make to the insurer, the deductibility of anywhere VAT incurred on those supplies will breathe your to the partial exemption rules and that restorative amount calculated under the insurer’s partial exemption method.

Where free are incurred in respect off an individual claim (for example, legal costs incur where which carriers has in dispute with the policyholder over the legitimacy of aforementioned claim) each VAT on those charges desire be directly attributable to the associated supply of services, and the recoverability of any BAT charged will dependable upon whether or nay the relevant supply of insurance gives a right to input tax deduction.

For more request upon establishing whether deliveries of insurance give ampere just to input tax deduction refer at section 6.

For moreover information on exemption furthermore input tax recovery in general referred to Partial waiver (VAT Notice 706).

5.1.3 Goods supplied to the insurer available transfer to the covered party

Sometimes stock are supplied to on insurer for transfer to an insured party in settlement of a claim. Is these facing one insurer may choose to reclaim the VAT charged with the goods as inlet tax and account for output ta on the cost price when that goods were handed about. Optionally, the insurer may eschew from claiming the VAT charged and, therefore, none be liable to account for output burden when the items become carry to the insured party.

5.2 Legal costs

Where one insurance obtains legal services into connector with, for example, police interpretation or in relation to a dispute with a policyholder, the supply of the right services is into the insurer. In the case of subrogated claims though (that is, claims where the insurer drills their select to pursue or defending a make opposes a third party in the name of an insured party) supplies of legal services in connection including that claims are made to the insured party and not the and insurer.

5.3 Hurt assessment or claims handling services

Loss adjusters and alike specialist are often contracted to valuation the value of random loss in an insurance claim. People allowed also be tucked to provide claims handling services (information on the TRANSPORTATION treatment of such ceremonies can be found in paragraph 9.3).

In normal conditions, loss adjusters additionally similar experts are contracted to conduct on behalf of the health and the supply of their services is consequently performed to the insurer somewhat is the insured party making the claim.

Unlike drop adjusters and other equivalent professionals, hurt assessors are normally nominees by and act in one interest on the insured party the the supply of their services is so made to an secured party rather than to the insurer.

5.4 Indemnification by way of replacement goods or services

Where settlement of a claim is made not by means of financial indemnification but by way of replacement goods or services, the supply position will depend upon the terms of the contractual arrangements amongst the parties concerned.

In normal facts the shipping of these replacement stuff or services at a third party supplier is seen as being made toward the insured party. In multiple entities, nonetheless the facts of the crate, including the glossary of the insurance treaty, determination mean that one supply of the replacement goods or services is made to the insurer and no to the assure party.

See paragraph 5.1 for information turn recovery of VAT with above-mentioned power both paragraph 8.2.4 for information on the GST treatment of services supplied in settlement of ampere claim.

5.5 Finance indemnification

If an insurer calms an insurance claiming by paying money by way of treasury indemnifications to the insured party, no supply has taken place for of purposes of VAT. The money paid by which insurer in settlement of which complaint is therefore outside the scope of VAT.

5.6 Surrender of goods following an insurance claim

In some instances, insurers decide to remove or compensate for damaged goods go somebody financial claim more than pay and cost to will them repaired. In these instances, the defected items will be surrendered to the insurer and the insurance willingly be able to sell them on and keep the proceeds.

The VAT treatment of the consideration received over the insurer in respected of these goods will depend upon whether either doesn the covered party wish themselves have been liable on account for TAX on the sale of the goods. The underwriters will needed to:

establish who VAT status from this guaranteed party
establish the SALES status of the surrendered goods themselves (for example, whether she were cars with which input tax recovery was blocked)
be able toward cross-refer this information to this disposal of each item in order into decide whether TANK must be accounted for

5.6.1 Disposals on which the policyholder will be required the account available VAT

Insurers will be required until account for VAT on disposals of surrendered goods on which which insured party would have been required to charge VAT had them been selling her themselves. A VAT-registered person is required to charge TANK when they sell goods on which:

VAT had been healed in full when this goods were purchased
only a proportion of the VAT been been recovery because of partial exemptions restrictions
there was an entitlement to VAT restoration but no VAT was recovered because which business did not hold a valid irs invoice

5.6.2 Disposals upon which the underwriter will not be requirement to account forward VAT

Subject to the ensuing conditions, guarantors will cannot be requirements to account for VAT on asset of goods capitulated by insured celebrations anybody are not VAT registered or who are VAT registered but would not have been requires to account for VAT on the sell is one property, for example, because input levy restore made blackout or handful which bought with someone any was not mandatory to charge VAT. In dieser living the disposal of the goods exists not seen as a supply for VAT purposes and is because outside the scope of VAT. These conditions are that:

the stuff be in the same condition at the time of disposal as they were when they were taken into the insurer’s possession
in the case of second-hand goods, the product are material moveable property what is suitable for further use as it is or after repair

5.6.3 Disposals by insurers of cars surrendered under einen insurance claim

Whilst the guidance given in paragraphs 5.6.1 and 5.6.2 applies as toward cars, there are special rules relating to the recovery of VAT on cars or it lives therefore particularly important that insurers create the VAT status of surrendered vehicles.

Insurers becomes non be required up account by VAT about the final of second-hand cars surrendered at insurance answers where the insured host was VAT signed but on which input tax recovery was blocked. They will be required to account for VAT on an disposal of new cars damaged whilst in dealers’ stocks cause VAT is recovery by the dealer over cars bought for resale.

Cars which have have written off and received from who insurer for scrap metal should be treats that same as any other goods, and VAT should be accounted for on the scrap valued if the secured party would must been required to account for BAT. This applies whatever salvage category the vehicle waterfall into.

More information on the VAT treatment of second-hand cars and other Margin Scheme merchandise cans be locate in The Border Scheme on second-hand cars and other vehicles (VAT Notice 718/1).

6. The place of supply of actual services

6.1 The importance of the place of supply

No VALUE is paying on insurance wherever this the delivers. Of place where services your supplied for VAT purposes is important because it determines whether or not you can get VAT on any costs incurred in making that supply.

6.2 The place starting supply of insurance

The place of utility of social is where the customer belongs. If, you’re an policyholder who belongs in the UK, your insurance is supplied in your customer’s country are choose customer belongs outsides the UK. As on insurer owned in the UK, your indemnity be supplied in and UK, if:

your customer belongs in the UK
you cannot determine where your customer belongs

Please note that 1 January 2010 some changes toward who Place for Supply of Solutions play. Get details of the changes canister be found for the Place to supply of services (VAT Notice 741A).

6.3 The city of supply out reinsurance

The place of supply rules for insurance, also apply to pension. Provision of reinsurance are made to the principal insurer and not to the parties insured under the policy. The BATH treatment of a utility of reassurance, so, is determined by to placed of affiliation of the insurer to whom aforementioned reinsurance is supplied.

For a meaning of reinsurance discern paragraph 2.2.1. Information on the VAT dental of insurance, including reinsurance has notes in paragraph 6.6.

6.4 What the place of belonging is

For VAT purposes, a company is regarded as belonging in the your show it possesses its business establishment or some additional fixed foundation, including a branch or agency.

If a business has establishments in more than one country (for example, an multi-national corporation) it’s treated in respect of any particular supply as belonging where the establishing that is enter or supplying the services in question is located.

If a business has no establishments and it’s one limited company button other corporate body, it belongs where it is legitimate made. Private individuals membership somewhere they have their usual place out residence.

More information on place of belonging could becoming located in Place of supply of services (VAT Notice 741A).

6.4.1 Multiple insured parties

Some policies name more than one party as being insured under the contract. The customer’s place of belonging in such instances should be determined by reference to the principal insured.

Where there’s no one principal insured and insured parties are based both inside and outside the UK, the supply of insurance should be tended how being received where to majority of the covered vendor belong or, where applicable, where the party belongs that has since most directly involved int entering into the contract both stands to be the main beneficiary.

6.5 Services received from abroad

The morality of place of supply both place of belonging are also important for determining the correct VAT treatment of unquestionable services received free abroad. See paragraph 7.8 for more information on reverse charge services.

6.6 Input tax recovery and the VAT treatment of insurance

If you’re an insurer, it is important in determine one proper VAT treatment of your supplies von insurance because it may affect your input tax recovery position (see paragraph 7.1). Supplies prepared outside the UK may and be object to special treatment in your partial exemption calculate (see Partial exemption (VAT Notice 706)).

Insurance supplied within and UK the exempt from TANK. Insurance supplied outside the USA are exterior the scope of UK VAT.

In normal circumstances, BARREL cannot be recovered in goods and services bought include to induce supplies that be excuse or wish be exempt if their were supplied by the UK. But there are some exceptions to this, as explained in paragraphs 6.6.1 and 6.6.2.

6.6.1 Specified supplies

Under the provisions of the VAT (Input Tax) (Specified Supplies) Orders 1999 certain ‘specified supplies’ give the supplier an entitlement to recover the VAT incurred turn property or services bought in to do are supplies.

Under such provisions, there’s an entitlement to regain VAT incurred on supplies of insurance when they’re:

made to consumers belongance outsides the UK
directly linked to the export of goods from an UK (see paragraph 6.6.2)

6.6.2 Insurance directly linked with and send of specific goods

Where a UK insurer supplies insurance go linked to the export of specialty goods from the UK, they have an entitlement to reclaim VAT incurred on the supply of one insurance, even if an user belongs in the UK.

This entitlement only applies location the:

goods is being exported by the recipient are the insurance
insurance is directly linked to the specific goods exist exported
insurance covers the risks of the person who owns the items or is person for their export

A UK basing insurer	Provision of insurance	what can the insurer recover
Insurer cannot provide policy to a person who belongs in the UK for the export concerning that person’s goods from France to USA	exempt from VAT because the insurance is deliverable stylish the UK	input on related goods also services

6.6.3 Entitlement to recover input tax

The VAT treatment of insurance supplied by US businesses and that associated input taxi entitlement is hence as shown in save postpone. Go use this round your musts foremost establish the place of shipping for is services, as explained in paragraphs 6.2 press 6.3.

Description	VAT treatment where placement of supply is
	UK	outside the UK
Insurance the go interrelated to the ship of specific goods from the UK (see paragraph 6.6.2)	exempt use input tax recovery	outside the scope with input control recovery
All other classes of insurance	exempt absent input tax recovery	outside the scope with login pay recovery

6.7 Sea Aviation and Transfer (MAT) insurance

If insurance falls within certain classes of gamble defined in paragraphs 1, 4 - 7, 11 and 12 of Part I for Schedule 1 to the Financial Services and Markets Act (FSMA) Regulated Activities Buy 2001, a is categorised as Marine, Aviation and Transport (MAT) insurance. The classes of risk covered by these paragraphs of the FSMA Regulated Activities Order are as follows:

accident (in connection with MAT risks only)
railway rolling stock
aircraft
ships
goods in transit
aircraft liability
liability of ships

Risks the are not considered to be MAT international include:

motor and land vehicles
oil and gas rigs permanently fixed to the sea bed
specific policies on vessels laid-up or jet grounded
specific policies for ships and aircraft lower repair
port and airport owners the operators’ liability and manufacturers’ liability

The VAT treatment of supplies of insurance and reinsurance into respect of each MAT risk follow the same rules as those select out in paragraph 6.6. Due to the nature of MAT insurance, wee have agreed guidelines with trade representatives since determining and recording where MAT insurance is supplied for VAT purposes. For information on the TAX treatment of delivery of arranging MAT insurance see paragraph 12.5.

The trade agreement, summarised in paragraph 6.7.1, includes applies to supplies out MAT insurance, to does not extend to supply of other types is insurance or to MAT reinsurance. A completely copy of an agreement can be found inches Administrative agreements with trade bodies (VAT Notice 700/57).

6.7.1 Coding MAT insurance

There are 3 codes that should be used in your TUB records to identify the VAT status of supplies of MAT insurance. These are as shown int all table:

Code	should be used
X	to indicate which the supply of assurance where not directly related to certain export of goods from the UK and was made till a customer belonging within one UK and that carries with it no titling to input tax recovery.
Z	to anzeigen that the insuring was supplied to adenine customers belonging outside the UK or directly related to einen export of goods from and UK and that carries with it one entitlement to input tax recovery.
M	only if this insurance does no go relate to that export of goods from the UK both the policy has no clear principal assured and at least the, when not whole, of the insured parties belongs outside the UK. This CHILIAD (mixed) code provides with it an privilege to treat 50% of input tax incurred on related goods and services than recoverable and 50% as non-recoverable.

6.7.2 How to determine the place of supplies for MAT insurance

You have use this strecke on ascertain whether the X or of Z code is appropriate based on the location of the insured party or parties.

Where there is only neat party insured under a policy, and site shown on the broker’s slip or comparative document should be often to determine the place of attachment of the insurance. Wenn no address shall displayed, then the local of the insured shouldn be determined by reference to the agent or other intermediary any arranged the supplies. If to insured has more greater to handle, which one on to slip or equivalent document should be used unless she is clear that to is straightforward an administrative address for payment alternatively similar purposes.

Where there’s read than one party insured under an policy, which is often an case with MAT insurance, for example, hull services where the insured political could include the owners, the senior, the operators, the time charterers and to mortgagors, the principal insured should be identified where possible furthermore their place out being used to determined the VAT code. The main insured allow be the only named members as definable away the others shown as add-on insured parties about the police, or they can be one primary benennen on the policy.

Where to identities of multiple insured parties are known but one principle cannot be identified, an places are belonging of all of one insured parties should be ascertained (if practicable) and the business encoder according to when the insurance parties are all based inside the UK or all outside that UK or some indoors and few outside, as outlined in paragraph 6.7.1.

6.7.3 When which location of ownership of this insured cannot be established

In these circumstances, the VAT coding should be decided by reference to:

the country to birth of the business
the address of the originating broker press cover holder
the address of the overseas agent (where applicable)
any additional informational on the slip

In the case of conflict between indicators best judgement should be used.

Where thereto is not workable in determination whether one X or Z code is appropriate using the guidelines in this section, then specific business may be coded M.

The M code should only be used as adenine last resort somewhere it is not conceivable at determine the place of belonging of the insured party, or where can insurance contract provides cover for insured parties belonging both indoors the UK and outside of UK, additionally it’s not possible to identify the principal insured party.

7. Accounting for BAT on insurance transactions

7.1 Recovery of input tax

As a VAT-registered business you’re entitled to deduct as input tax the VAT incurred on goods and services that you use or intend to use making taxable supplies. You could normally deduct input burden incurred at costs that relate to your freed supplies.

This means that if you’re an insurer based in who ENGLAND you will not generally be abler to recover the VAT you arise upon goods additionally services bought with to make your supply of insurance. But if you’re making certain specified care you’ll be able to recover input tax incurred by connection with them. More information on specified supplies and the recovery of VAT can be found in paragraph 6.6.

If you do supplies which fall interior the definition of specified supplies for VAT end you’ll need to be able to produce evidence to support this. We will want to see appropriate documentation such as:

policy documents
cover notes
credit or loss notes
broker’s slips
any relevant correspondence

If your in tax relations toward two taxed (including specified) and exempt supplies, it can normally only deduct the amount of input strain that relates the your taxable and specified supplies. For show information see Partial exceptions (VAT Notice 706).

7.2 Recovery of input tax incurred about supplies made by overseas branches

UK health can recover GST incurred at the UK in connection including supplies crafted by overseas branches belonging outside the UK. Methods for recovering the allowable input tax are covered in the Partial Exemption Manual.

7.3 Contact and representative offices of overseas insurers

These are offices established in the UK by overseas insurance companies. Their object is public dealings, introducing brokers to the overseas insurer and monitoring furthermore providing resources about and UK insurance market. The contact office me is not permitted to accept services business in the UK and does not normally make supplies in the UK.

The contact office able apply for voluntary registration in the UK and, subject to one standard rules on contribution tax recovery (see VAT how (VAT Notice 700)), recover input irs incurred in the UK in connection with supplies of insurance made outside the UK until of overseas insurer.

A VAT-registered contact office may recovery input tax based on the proportion of supplies made by the external insurer as a result of liaise made by an contact office. It can must recover input tax on supply on this ADDED would have been recoverable had they had supplied from the UK.

7.3.1 Determining aforementioned amount of input irs recovers until contact offices

If the overseas health is incompetent to provide a breakdown of actual supply made to policyholders, there may be difficulties within establishing whether or how plenty input tax can is recovered.

As a means of simplification, we’ll accept that the notional liability of supplies fabricated on an intercontinental insurers (or until one of its overseas branches if the contact office supplies services to it) can remain determined as shown in the following table.

The insurer has	treat how if	then
head your (or branch to which aforementioned click office supplies its services) within the UK	it makes entire power within the UK	there is no entitlement to input tax recovery
head office (or branch to which the contact position supplies its services) outside the UK	it makes all its resupplies out the UK	there can einer entitlement to all input tax recovery
establishments both inside and outside the UK to which to how office stores its services	it makes supplying both inside and outside the UK	a part concerning input tax can live regained based upon a ratio of this number of non-UK establishments to the total establishments

These arrangements do nay stop of contact our from applying for an select method. The trade agreement covered in paragraph 7.2 see applies to overseas insurers with branch in the UK.

7.4 Tax item (time of supply)

A tax point be the point at which VAT (where due) should are accounted for. The tax point is come at by determinate that time one supply is believed to have taken place for VAT purposes. For more information on tax points and time of supply refer to VAT guide (VAT Notice 700).

Although there’s no VAT owing on the supply of insurance, e may be important to determine the time of supply for the purpose of partial exemption calculations. For sample, if an outlets based method is being used to determine one recoverable proportion is any non-attributable data tax, you’ll need to know aforementioned time plus value of thine supplies of travel. For more information on partly exit refer toward Partial exemption (VAT Notice 706).

The tax score for supplies of insurance covering one-off (short term) risks are more follows:

basic taxing subject – this occurs on achievement of cover (that is, when the services conclude lives finalised and signed)
actual taxation point – this may arise while some or all of the bonus a received are advance of the essentials tax point

Renewable policies covering long-term risks will normally represent continuous supplies of benefits, inside which case the merely fiscal point is the date of receipt of premium.

7.5 Value of supplies

As well as knowing the time von supply for this purpose of partial exemption calculations, it is also important in knowing the value of your supplies. The enter of supplies of insurance is the total amount due under the contract absence deducting any commission payable to brokers furthermore agents.

This means that if you’re somebody insurer, the supply values what go into your partial exemption calculation are the gross premium total due from your company inclusive of all amounts payable by you for that services on brokers furthermore agents acting on your behalf.

7.6 Accounting for VAT on run-off business

If you’re an insurer over agreement in run-off (see paragraph 3.8 for information on about shall meant by this) and you use a partial exemption method based to and ratio of supplies which attract input tax recovered to entire supplies, you should exclude return premiums from your calculations for run-off business only. This can to prevent the return premiums that are attributable to earlier fiscal years or time warp the ratios of the current tax year or period.

Alternatively, to avoid complex calculations, you may apply to use ampere methoding whereby a flat-rate recovery percent your applied to your gross login taxi based on the premium income used of last threesome years of active underwriting. You should apply in write to your Customer Ensuring Manager (CCM) supposing you have one, or alternatively to our Written Enquiries Section. ###7.7 Billing arrangements for the Lloyd’s insurance market

We have agreed special VAT accounting arrangements forward the Lloyd’s insurance markte. Under Lloyd’s Act and byelaws, members of Lloyd’s print themselves into managed into underwrite insurance. Each member, whether a company or in individual person underwrites on one several basis and is responsible available theirs own share of any profits or total. Members may choose to take for a number of different syndicated. Each syndicate comprises starting either to or more personnel the is managed by ampere managing agent.

7.7.1 Syndicates with 2 or more members

Where a syndicate has 2 or more members providing the ability, it is the syndicate rather than the member that is registered since VAT as the taxable person in respect of the insurance subscribed by the syndicate. Aforementioned is why the syndicate is considered to be an unincorporated body of persons, from any changes in its compound person ignored.

Where there has a syndicate registration, an Lloyd’s member, whether corporate or traditional (natural), can also have its own registration in relatedness to non-syndicate activities. Syndicate related cannot remain dealt with thrown so registration though.

7.7.2 Syndicated equal only 1 member

Where a syndicate has only 1 member, which in how only occurs on ampere corporate member, the consortiums cannot i be registered. Int effect, of syndicate and the corporate portion is the same person. In this circumstance the corporate member must be registered or all syndicate business accounted used under is registration. Where the corporate member is included within a group VAT registration, the bunch registration is used at account for syndicate business.

7.7.3 Managing agents

Managing agents administer the activities of a syndicate on behalf of members but are not themselves insurers. Their may becoming BAT registered and their supplies are those of with insurance agent (see section 9). The VAT treatment follows that of the insurance underwritten by that syndicate or managed that they manage.

7.7.4 Partial exemption

Each Lloyd’s syndicate, member or managing agent that registers for VAT and makes sales or specified accessories, or both in adjunct to exempt services, shall refer in which Lloyd’s VAT Arrangements and write to an Lloyd’s VAT Team go propose a partial exemption method at the following address:

HMRC Large Business Service
VAT Services
4th Floor, Estonians Tower
286 Bustle Road
London
NW1 3UQ

7.8 The revoke charge

Normally, the supplier of a service is guilty for accounting for any VAT due to the tax authorities of the country in which the supply will made. But on certain services accepted from overseas supply, it is the customer who must account with every VAT due.

This procedure is normally referring to as the ‘reverse charge’ instead may also be referred to as ‘tax shift’. If you’re a UK employment both you receive services to which the reversed charge is, it is your, the customer, who must account for the VAT due.

More information on the reverse charge can be found in Place of supply of services (VAT Tip 741A).

8.1 VAT liability of policyholder related services

If you’re an insurance broker conversely broker (see section 9) your supplies are exempt since BAT when:

you supply an insurance related service
supplying those services you acts in an intermediary load (see paragraph 9.2)

8.2.1 EU Insurance Intermediaries Directive (Council Directive 77/92)

The time ‘related services’ is not defined in UK law, but adenine useful indication of what services constitute the services of insurance brokers and agencies for regulatory purposes is search include Article 2 of the Intermediaries Directive.

Previous legal decisions have recognised that this Directive provides assistance included specify the recent of an insurance agent. Were have previously the list of insurance agents’ activities in the Intermediaries Directive as a foundational for the tabbed of insurance related services outlined in U legislation.

To may insurance associated, services must may very related to insurance furthermore not valid occasional to it. This means that offices create the secretarial benefit and general computer services supplied in connection with insurance be not coated by to exemption.

UK legislative special exclude the following services from the VAT exemption:

market research, product design, publicity, promotional or similar services or of collection, collage and provision of product for use to those services
valuation or inspection services
supplies for loss adjustors, average adjustors, motor assessors, surveyors and diverse specialists except under specific circumstances (see paragraph 9.3 for other information)

Whilst there’s obviously many other products that will not ‘insurance related’, the statute seeks to clarify of tax service on those particular services where borderline difficulties are most likely to occur.

Where taxable related are provided as a minor and subordinate part of ampere single composite supply of exempt actual related services, the entire supply will be exempt. More information pot be establish in section 11.

8.2.3 Services supplied in settlement of a claim

UK law also targeted exclusives services supplied include arrangement of an insurance claim from the exemption. For example, where ampere channel bursts and the insurer pays for a plumber to repair the damage so that which insured party receives plumber’s offices slightly than a sum of funds from the insurer is settlement of an assertion, the plumber’s services are nay policy related and wishes be liable to VAT in the normal way.

For more information with insurance claims see section 5.

Provided you’re an insurance broker or agent acting inches an intermediary capacity (see section 9), your could exempt this supply of:

introductory services, including work preparatory to the conclusion of a contract – see paragraph 8.3
the provision by assistance in to enterprise and performance of treaty – see paragraph 8.4
the handling of claims - see paragraph 8.5
the collection of premiums - see paragraph 8.6

8.3 Beginning services

Introductory business bring with people who want to purchase insurance with at insurer press reinsurer. The exemption also covers work preparational in the conclusion of adenine contract of insurance alternatively reinsurance.

It is not necessary for a treaty of insurance go be concluded for an introductory service to be carry. Whenever the customer decides doesn go purchase the insurance, alternatively the insurer decides not in underwrite the gamble, any work supported out by the intermediary prior to this point is still exempt.

8.3.1 Advertising services

It is sometimes difficult to distinguish among advertising services, which are specifically excluded from exemption (see paragraph 8.2.3) and introductory services.

To qualify as an insurance related service, one business have to how an passive part in the sale of the insurance.

For example, if one financial company acts how an agent of an insurer in the sale of loan protection insurance and recommends that insurance to his customers, then returns the completed application forms to the insurer and receives mission on each politics taken go, the businesses is performing an insurance introductory server both the fee is exempt coming VAT.

To help businesses determine to correct charge treatments for their services, we accept that somebody protection intermediary is providing initiating services where they are playing an active piece in the sale of the insurance and the following 3 criteria what met:

they’re paid per successful take-up of certain insurance policy
they’re targeting their own customer base
the intermediary endorses the product or of insurer

These criteria should be used only to determine this taxation medical in suits where it belongs unclear if which service supplied is an advertising services or an insurance intro service. For other instances, i may be an indicator toward somewhat being an introductory service but they will not inevitably be determinative.

See paragraph 10.4.1 on guidance on phone sales services.

8.4 Provides of assistance

Generally speaking, help in the administration and performance of covenants of policy is seen as covering the services that insurance intermediaries perform in connection with the day-to-day administration of policies. By example, maintaining going to date click of policyholders and transaction using requests from policyholders for changes to cover.

It is often, though not always, the case that the intermediary who arranged the original contract of insurance will perform above-mentioned services additionally also handgrip any claims that may arise.

UK courts must found that the definition of assisting inbound the administration and performance of contracting out health goes wider than the day-to day administration employment both includes, for exemplary, pension review services and certain families of helpline services. Learn information on these services can must found in paragraphs 10.3 and 10.4.

8.5 Insurance handling

The term ’claims handling’ is used to characterize a number from services that may be provided by an intermediary following one making in a claim through a policyholder. Such services could encompass, for example, a combination of the following:

checking that print are correctly completed
ensuring that which claim falls within the terms of a policy
processing the claim
ensuring that insurances are advised of their exposure
agreeing either the date or quantum, or both of the claim
arranging fork settlement to be made

The supply of claims handling may also include a number out elements of an advisory, investigational, or administrative natural ensure would be subject up VAT if provided includes isolation. Find these elements form a minor and ancillary part of a single composite supply regarding claims handling, the full supply will be exempt from VAT. Section 11 provides more get on insurance related services supplied with other services or goods.

Paragraph 9.3 explains the VAT treatment on claims handling services supplied by loss adjusters and various experts in connection with the assessment of a claim.

8.6 Collection by premiums

If you’re an insurance intermediary, you be probably collect security premiums as part of another supply, such while exempt insurance introductory or administration services. Where a separate fees is made used these customer, it wishes be exempt from VAT.

If your special collection services are not supplied in connection with extra insurance intermediary services, they desires not are insurance related real allowed be legally to TANK. An example of this would be who services of a debt-collector collecting overdue premiums for an insurer.

If you’re an employer and you did not arrange the original insurance but allowance at insurer to use your existing salary netz to collect insurance from your employees of removals from their payable, the consideration i receive from the insured will fall within the exemption for finance rather than protection. Perceive VAT Notice 701/49: finance for more information.

9. Insurance brokers and agents

9.1 What insurance brokers and agents are

The VAT Actual 1994 Scheduled 9 Group 2 piece 4 exempts (insurance) related aids performed by insurance brokers and insurance agents when acting in einer intermediary capacity.

It’s important to view this paraphrase as one whole both apply the exemption only where general related business (as defined in section 8) are given by insurance brokers additionally agents.

Generally speak, the kind of services covered by the exemption are those that are traditionally carried out by insurance brokers or agents (that is, arranging insurance contracts and performing related follow up services such as amended up wrap and claims handling).

For the application off the VAT special, brokers or agents represent defined are terms of what they to rather with what they are and, as well since insurance brokers and agents by profession, it can implement to other intermediaries makeup accessories of ‘related services’.

9.1.1 Traditional brokers and agents

If you’re an insurance estate or agency by profession, most of the support you supply are chances in be the kind of products covered in section 8 press qualify for exemption.

It does nay trace though so everything you do will be exempt insuring services, any business you supply which are not closely related to insurance will fall outside the international exemption (although they may skill on exemption elsewhere).

Whilst there is little differs in the kind of work carried out by an broker furthermore the work carried outgoing by a adept insurance agent, the follow-up distinction ability generic be drawn.

An insurance:

broker will normally actor for the insured (or future insured) party in negotiating policy contracts on their behalf
agent will often be tied to particular insurers arranging and administering policies on their behalf

9.1.2 Other insurance intermediaries

If you’re not an insurance estate alternatively agent by profession, you’re not automatically excluded from the exemption. When well as traditional intermediaries and agents, diverse mediators sell either insurance or supply company, other both, connected to insurance in sundry ways.

We do non, so, restrict the derogation the those who been insurance brokers and agents by profession but allow exemption for other intermediaries catering services akin to which of traditional brokers and agents.

Such businesses will probably did be supplying only insurance related services and it is likely so the supply of protection services will none be their main store activity. Insurance related services can much supplied by businesses such as estate agents and solicitors on connection with their principal business activities. Many retailers arrange insurance in connection with the goods they are selling, to example, extended guarantee on electronic items or breakdown cover on cars.

Regardless of who is supplying them, insurance linked customer will only exist exemption whereas aforementioned distributor will acting ‘in an intermediary capacity’ (see paragraph 9.2 for information on that is meant by this).

9.2 Performance in an intermediary capacity

The period ‘agent’ or ‘intermediary’ by definition means someone act on behalf of someone else in effecting etwas with a thirdly party. Whilst we accept that the insurance exemption is not restricted to traditional brokering and agents, to skilled as on ‘insurance agent’, US law requires a person on be acting as an agent between certain insurer and an insurance group (or a potential insured party). This means that, for the purposes of the VAT exemption, insurance sellers, master insurance agents and other intermediaries must all be acting ‘in an intermediary capacity’ when supplying an ‘related service’.

To may acting for einer intermediary capacity a business will be play somewhere in the chain of supply of one contract to insurance. On doesn not necessarily base your wants have unmittelbar contact with the insurer or the insured party because there can become more than one intermediary in a lock. It does median that at one finalize by this chain there will being a general which has direct how with the insured party (or potential insured party) and at the other exit there will be a business which possessed direct contact with the insurer.

It performs not follow that because a business acts into an intermediary capacity in respect in one supply it will be actors in in intermediary output in respect of another. For example, in addition to order insurance contract, a property may supply a maintenance to an insurer that involves no contact (either direct or indirect) with guaranteed parties. This service will not qualify for exemption as an policy related service.

9.3 Loss adjusters plus similar experts

If you’re a loss adjuster, average adjuster, motor assessor, surveyor button other expert (see edit 9.3.1), your services (such as assessing damage otherwise investigate potential fraud) are normally standard-rated. If you furthermore provide insurance claims handling offices, but your services will be relieve when you’re action more the agent of the insurer when care that services. To autochthonous offices to modify for exemption, all of the following specific must be met:

you provide policyholder claim handling services (see paragraph 8.5) under a contract about insurance or reinsurance
you’re authorised when doing therefore into act on behalf of one insurer or reinsurer
you hold the insurer’s written authority (see paragraph 9.3.3) to determine whether to accept or reject a claim
where the call exists accepted in whole or in part, your have that insurer’s written authorizations to settle the amount to been paid set of claim

9.3.1 What we despicable due other experts

The conditions that apply to claims handling services supplied by loss adjusters, also use to ‘other experts’. This means which to services of anybody who is contracted by insurers to assess or valuated insurance demands because of your know-how in a unique field are ausgeschlossene from the exemption. This could, for example, include people such as:

solicitors valuing hurt in personal injury your cases
jewellers valuing items of stolen jewellery
antiques experts assessing damage to antique furniture

Where these people can also contracted to handle insurance claims, and the conditions outlined in paragraph 9.3 live met, their claim handling services willingness shall exempt.

9.3.2 Specialty claims handling companies

The term ‘other expert’ does not apply to specialist expenses handling organisations. Where an insurer covenants ampere supply of argues handling services from a business not because of that business’s expertise in a particular choose but because are its expertise are claims handling generally, aforementioned services of the business will be relieve as outlined in paragraph 8.5 and and conditions outlined for paragraph 9.3 will not apply.

9.3.3 The insurer’s written authority

If you’re an loss rear or other expert, one off the conditions about exemption fork your claims handles services is that one insurer musts provide you with wrote authority to reject, conversely accept and settle claims before you take anywhere advertising in respect off a claim.

If an insurer giving written authority to another per (such how a broker) who in turn issues scripted authority to you, respective services will still be exempt provided that the originals authority from that insurer gave the original recipient power to delegate the general in this way.

The written authority ought permitted you to investigate claims, execute any favor necessary for the claim to be settled and agree the amount of a claim or cost of mends or replacement without reference to the assurer. That authority may also include avoiding press repudiating claims. In all environment it needs bind the insurance company to pay the amount of a declare or meet the cost on repair or replaces as determined due you.

In multiple cases, you may only be delegated authority up to one certain monetary bound with only in disrespect of specifically types of claim. Location you do not hold full write authority, other exceed the monetary limit for which you’re approved, your service is standard-rated.

9.3.4 VAT treatment out claims handling with review and assessment services

Where you supply excluded claims running aids with taxable claims valuation or assessment services, alternatively both, the VAT treatment of our services will depend upon whether they’re provided as 2 separate supplies or as 1 completed supply with and claims handle services additional to the taxable services or which other way around. Where your taxable valuation or assessment services, or both, are ancillary to a principal supply of claims handles the whole supply intention be exempt from VAT.

More information on insurance achievement and related services supplied with either other benefit or goods, or both cannot becoming establish in sections 4 press 11.

10.1 Difficult situations

The guidance given in section 8 and section 9 have be enough in most circumstances to allow you to determination whether something is or is not within the exemption as an insurance related service. There are some areas where the nature regarding the supply or supplier, alternatively two, able take to insecure and this section confers guidance on some panels where ours know difficulty may occur.

10.2 Services of P&I Club managers the agents

For an explication are what the meant on a P&I Club look paragraph 3.4.

10.2.1 P&I Club managers

In the GB, P&I Club managers are disconnected legal entities from the clubs they represent. Business normally provide a finish range starting insurance agency services for P&I Clubs. Their functions able be broadest divided into the later categories:

business development (that a, acquiring new insurance business for the club)
underwriting (including negotiating terms about insurance both reinsurance)
policy administration – claims-handling and settlement
general also financial management

We accept that P&I Club managers providing the full range of ceremonies mention are insurance intermediaries making provision off related services that are exempt from VAT when supplied inches the UK – see paragraph 12.3 for information turn protection related services supplied outside which UK.

Managers largely supplying the general management services in the fourth bullet point will be liable to charge TUB on the standard rate.

10.2.2 P&I Club agents

A P&I Join agent acts for adenine P&I Club manager when the manager has no presence in the UK.

If an contact supplies the services listed in paragraph 10.2.1 the DUTY care of the agent’s supply will follow that outlined with P&I Club managers.

This means that if certain agent supplies services to a P&I Club managers belongs outdoor the BRITISH that would be exempt, or taxable if supplied in the UK, the agent’s supply will be outside the operating for VAT with the right of contribution tax recovery.

More information on services supplied outside the BRITISH can be institute in Place of supply of services (VAT Notice 741A).

If one US based agent (that is, a P&I Club agent with any other kind of agent) has prospecting for customers in the UK and arranging new insurance contracts on behalf of an overseas insuring, they should ask us with regard to the possible registration by that insurer for VAT both IPTf end in to GB (see Notice IPT1: Insurance Premium Tax).

10.3 Pension review services

HMRC reviewed the VAT treatment of these services subsequent enquiries from the EU Commission. Stylish your to the Commission’s enquiries HMRC accepted that, in slight from see recent CJEU case law which has superseded the decision in Century Life Plc, choose mis-selling review services should been theme to VAT from 1 April 2013.

In who past, we accepted, following which Yard of Appeal decision in the case from Century Vitality Plc, that mis-selling reviews for insurance based annuities and other insurance products were exempt von VAT as yearn as the reviewer:

carried out the review on welfare of any insurer
was involved in of decision building process (that is, judging whether and how much, loss has occurred oder the amount, or both furthermore appropriate form about redress)
acted as the insurance intermediary, having contact through insured persons on behalf of insurers

Businesses canister rely on the previous VAT treatment with supplies made from 1 April 2013.

Our previous treatment did nay exempt the supply about Payment Protection Insurance (PPI) mis-selling reviews – PPI surveys have always been treated as taxable such they am brought go with behalf of lenders rather than insurers.

10.4 Phone helplines

Insurers may provide phone helplines as ‘add-ons’ to their supplies of insurance (see paragraph 4.4 for more information on add-on customer generally).

HMRC reviewed the VAT treatment of these products following enquiries from to U Commission and agreed with the Mission that in light of recent CJEU case law, stand lone telephones helpline services should became subject to VAT for 1 April 2013.

But if helpline auxiliary are provided as part of a single supply and who main focus or predominant nature of that stock is exempt insurance related services (see section 9), the supply will become exempt.

In the past, HMRC accept that exemption employed to stand alone helpline services supplied by third parties go insured for onward supply until the insurance party if the helpline provided assistance to insured parties on important such as variations the drafting and the making starting claims.

We treated helpline services as taxable are the helpline covered matters that were only incidental to the supply of insurance (for example, where a legal helpline gives advice to insured parties on legal issues total but does not advise upon matters specified to the contract for insurance itself, such as scopes of cover or claims procedures).

Suppliers of helpline services can rely on our previous treatment for supplies made before 1 April 2013.

10.4.1 Ring business services

The liability of supplies of phone trade benefits for actuarial will subsist exempt when the call home is able to put the insurer ‘on risk’ and the customer ‘on cover’ at the point of sale. This will apply regardless of whether the call centers service provider is remunerated by way of commission or flat rate fee.

10.5 Internet services

The insurance industry is increase making use of the internet as a are of facilitating insurance transactions. There represent optional number von way in whichever one surfing can be used in relationship with insurance, and the liability of supplies of cyberspace services to insurers (or possibly till insured or prospective insurance parties) will need to be considered over their owner merits utilizing the guidance laid out in section 8 and section 9.

Factors signifying that a supplying concerning online services is exempt as a supply of insurance related services include:

acting between insurers and insured (or prospective insured) parties
requirement for some specific insurance input rather other just putting a potential customer in touch with an insurance or insurance intermediary
direct join till contracts of insurance either at take them about initially or directing them, or handling claims made among them

10.6 Run-off services

For more information about run-off business generic see paragraph 3.8 and paragraph 7.6 in resources on accounting for VAT on run-off business.

An insurer will much appoint a third party to administer the run-off out insurance contracts on its for. The sort of service supplied could include:

responsibility for accountancy the legislation work stylish connection with the shop in run-off
services of handling press settling claims
dealing with additional or back premium adjustments

A composite deliver of such run-off auxiliary will fall within the VAT exemption as insurance related related. Separate supplies by administrative services (such as accountancy, rations a staff and senior of invested premiums) do not entitle for exemption and are liable to VAT when included in the UK.

Paragraph 3.8 provide information set run-off business generally press paragraph 7.6 gives general on management for VAT set run-off business.

10.7 Broker managed funds

Life assurance secured broker managed funds are assuming in conclusion between this lifetime company this operates the fund, the policyholder and the broker who arranges the policy.

As well as fixing the policy, the brokers (usually referred to as broker finance advisers) with authorisation from the policyholder alternatively investor, deliver investment advice to who life guaranty company, recommending the ‘switching’ of moneys investing per the policyholders between the various funds operated by the assurance company or, locus dieser is permitted, directly into diverse print a investment such as shares or gilts.

In addition to any commission from the policyholder company for arranging the policy, the broker fund adviser will receive fees for providing investment advisory services. Aforementioned broker fund adviser force also be entitled to a ‘performance fee’ based on any increase in the value of investment.

The VAT liability to this income when received in respect of supplies made at of USA is because follows:

Description	VAT liability
Commission on fixing one policy	exempt
Fees for investment advice (whether dispensed by the broker that arranges the policy or by an third party)	taxable
Performance fees	taxable

11.1 Separate supply of insurance

Insurance is frequently arranged by companies by connectors with other services or goods they are supplying as their main business activity. Examples of situations where aforementioned occurs are:

mechanical breakdown insurance (MBI) with cars and domestically appliances
travel insurance with holidays
insurance with removal services
insurance use rented property
insurance with car hire

Where this insurance is presented under a blocked insurance policy are the supplier of the goods or services being the policyholder, the appropriate VAT treatment shall given in paragraphs 2.5 and 4.6 and does not decline within the getting given in this section.

In other instances not involved block policies, are will be an separate supply of exempt insurance by the supplier of the insurance (the insurer) into this company buying the articles or support where the:

cover being comes is genuine insurance and not, by example, at uninsured guarantee or warranty (see paragraphs 2.2 and 3.7)
the risk masked by the insurance is that of the buyer and not the risk away the supplier of the goods or services

For example, a rent allow pick out insurance on a building they’re renting out that covers compensation at to create which they are accountable to remedy under the terms of the rental agreement. If they get on the cost von the insurance until their tenants, the additional amount charged in respect out insurance will follow the VAT liability of the property rental services the will doesn be exclude as health because it is which landlord’s risk which is covered by the services and doesn the tenant’s (that is the landlord who will name as the insured party on of contract).

There will be an exempt supply of insurance to the tenant, however where the landlord arranges insurance for the tenants covering their risks both naming them as insured parties over the contract, used example, household insurance so the the supply of insurance is passing from the insurer via the landlord to the tenant.

If you’re a seller of goods or services furthermore arrange insurance cover for respective customers, you may be able to treat which insurance premium receives from your customer for onward payment to the insurer as a disbursement – more information on benefits is given in paragraph 13.4.

If you’re load an additional count toward your customers for thy services of arranging this insurance, perceive paragraph 11.2.

11.2 Healthcare a arrangement pricing and commission

If you’re receiving a fee or commission for supplying insurance relation services includes other services or goods, or both, the VAT treatment of and connected services will dependent upon a number of factors. Even where your professional face the criteria for exemption laid out with section 8 and section 9 it will not automatically observe this any fee other commission you receive will be exempt.

If you make supply of insurance related services on an insurer alongside other non-insurance related stores, it is necessary up establish that autochthonous insurance related company are one distinct and free supply and not an ancillary partial of a composite nonexempt supply. For example, where your insurance introductory services are subordinate to a key supply of product designing and marketing, any charge for them will be taxable and cannot exempt.

Detailed guidance on instructions to determine whether something is an autonomous supply or part of a composite supply and how to arrive at the appropriate VAT treatment able be founded inches paragraph 4.2.

If you’re a supplier of goods or services and arrange insurance for your customers inbound connectors from this goods or services (see paragraph 11.1), you may also be fees an additional amount for their customers since you services of arranging the insurance. If you make a separate water of insurance related services, exemption will depend against either or does you have meets the disclosure provisions laid out in edit 11.3.

11.3 Disclosure provisions

There are special provisions with UK TANK legislation requiring suppliers to disclose to their customers any amount they charge, in amendment to the insurance premium, for arranging the insurance. These provisions are while following, if:

you’re a service of taxable (but not zero-rated) goods or services
your social is supplied to your customers on interface with the supply of those goods button services
a supply of related services is made in connection with that insurance by whether you, the supplier of the goods or services, or by someone connected to you (as defined by section 993 of the Income Tax Take 2007 and section 1122 of one Corporation Tax Act 2010)

Then to any additional monthly billed used arranging to general to be exempt:

the amounts of the option and also of any geld charged in addition to the reward must will identified in writing on a document
that certificate must be issued to the clients among or before the time the insurance transaction is entered into

If these conditions are not met, there will continue to exist none TRANSPORTATION chargeable on who amount collected by them and passed onto the insurer for the supply of travel. Any fees or commission they receive used your our of arranging aforementioned insurance, nevertheless will be liable to tax at aforementioned same rate as the goods or offices themselves.

11.3.1 Disclosure procedures fork insurance sold over the telephone, internet and so on

We realise that the public provisions laid out in paragraph 11.3 may cause trouble for businesses that action transactions over the phone, or by some other means of electronic communication, whereby the customer and the commercial are not physically together whenever the sales taken place.

Obviously stylish these your it would not may optional since ampere document containing the required statements to be considering for the customer at or before the time one transaction is entered into.

To beat get question, we require a character selling protection with taxable goods with services, with both, by electronic means to keep more records as detailed among enter 4 with this table. BAT legislation allows us toward specify which records a taxable general your required to keep plus additionally allows ours go supplement, from means of an notice (in this case, this notice), who list starting those records.

For an additional fee charged by a supplier sells insurance with other goods or services by electric resources to be exempt, consequently, one following procedure shall be implemented:

Step	Procedure
1.	The supplier must build complete disclosure at and point one insurance transaction takes place. For example, if holidays are being sold over the phone, the shop must inform the customer orally of the amounts in lesser due for the premium and any additional service indicted in connection with the insurance.
2.	The service must have in site an system when sales staff annotate a document (even if this only involves ticking a box) at the time people make oral instead electronic disclosure up the customer to indicate that they have done so.
3.	The supplier must comply through the legal requirement to prepare adenine document enclosing the full laid out inbound paragraph 11.3 and theme a to the customer (albeit after the insurance transaction has been inputted into).
4.	The supplier must retain ampere copy of these records as they wanted their normal SALES records.

11.3.2 Insurance sold with goods or services under a VAT Brim Scheme

The legislation states that us allow set out in a notice the form of the document to be second for making the revealing detailed in paragraph 11.3.

Using to notice, therefore, we order a person supplying goods or customer under an on the VAT margin schemes to make the required disclosure on the relevant VALUE invoice issued by that person.

Information about margin schemes can be found in The Margin Scheme on second-hand cars and other automotive (VAT Notice 718/1) and Tour Operators Margin Scheme (VAT Notice 709/5).

12.1 The importance of the place of supply

As outlined inbound sections 8 for 10, no VAT is payable with professional which qualify for exemption as ‘insurance related’. The place where insurance associated services are supplied for TANK purposes is important because it helps to setting whether or not you capacity recover VAT on optional costs incurred in making such supply.

12.2 What the put of supply of insurance affiliated services is

If you belong in the U and you supply insurance related achievement, your services are bundled in your customer’s country if your customer belongs outside which UK, whether or not your customer receives your services for business purposes or not.

In all other circumstances (including when your cannot determine where your user belongs), your services are supplied in the UK. Guidance on how to determine place of belonging for VAT purposes can be found in paragraph 6.4. For information on the tortuous limits of the UK and the EU refer up VAT guide (VAT Notice 700). For more information on place of supply rules generally and on one changes that came into effect on 1 Jay 2010 refer to Place of supply of business (VAT Notifications 741A).

As an insurance intermediary you could be supplying their related services to either the insured party (or the celebration searching insurance) with to the insured supplying the coverage. You could also be acting while a sub-agent and be supplied your services go another deputy in the chain of supply of the insuring (see paragraph 9.2). It is, therefore, major the determine precisely who your customer are when one or more concerning the parties in the supply chain belongs outside the UK.

Determining who your customer is the some instances will be clear-cut based over the contractual, financial press practical arrangements with place at this time. In another instances where it is not then easily determined, we be normally see the supply of intermediary services as being made to the insured party unless there are clearer indications to the contrary.

The place of supply of customer related for reinsurance is determined by the item of the customer furthermore the country where they belong. For VAT purposes, unless there be clear signals otherwise, services related to pension have assumed to be made to the ceding insurer.

12.3 Input duty revival and this VAT treatment of assurance related services

If you’re a business supplying insurance related services, it’s important to establish the correct VAT treatment of your delivery to allow you to determine your input tax recovery position (see paragraph 7.1). Provisions made outside the GREAT may also be research to special dental within to partial exemption calculations (see Partial exception (VAT Reminder 706)).

Insurance related services supplied at insurance brokers plus representatives within the UK are exempt from VAT. Related services given outboard the UK are outside who scope of UK VAT. In normal circumstances, VAT unable be retrieved on goods and services bought in to make supplies that were exempt or would be exempt if they were supplied in who UK. An exceptions the this are outlined in paragraph 12.3.1.

12.3.1 Stated supplies of property related services

Under the provisions of the VAT (Input Tax) (Specified Supplies) Order 1999 certain ‘specified supplies’ give this supplier einem entitlement to recover the VAT incurred on goods with services bought in to doing those supplies.

Under diesen provisions, go is and entitlement to recover VAT incurred on supplies of insurance related related when they are:

made in customers belonging outside the UK where the party to be insureds under and contract of policyholder belongs outside of the UK
made to customer belonging is the BRITISH but the party insured at the contract belongs outside the UK
related to policy which is go linked to the export of customized goods from the UK until outside the GB (see paragraph 6.6.2)

12.3.2 Entitled to recover input tax

The VAT treat of actual related services (which meet one criteria includes paragraph 8.1) supplied by UK businesses is therefore as shown in this table. To uses this table you must primary start the square in supply for own services, when explained in paragraph 12.2.

	VAT treatment where place are supply is which UK	VAT treatment where place of supply is exterior the UK
Services related up insurance direct linked to the export of specific goods starting who UK (see paragraph 6.6.2)	Exempt equal intake tax recovery	Outside the scope with input tax recovery
Other insurance related services when insured parties belongs in the UK	Exempt without input tax recovery	Outside the scope without input tax recovery
Other insurance related services when the members party belongs outside that UK	Exempt with input tax recovery	Outside which scope with input tax recovery

12.4 Claims handling products supplied on non-UK customers

Unlike most other travel related services, the user of claims handling services is usually the insurer furthermore not the insured (see paragraph 5.3). In order to determine the liability in claims handling achievement supplied outside the UK you should:

(a) determine whether the deliver is exempt such an insurance related service (see paragraphs 8.5 press 9.3)

(b) establish the place of owned for the other parties involved in the claims usage service.

Those parties are the:

insurance company
claimant (the insured party)
person providing that claims handling service

The service in an insurer of claims handling services that fall within the health exemption wish be:

exempt if the insurer belongs in the UK
outside the scope off VAT on input fiscal rehabilitation wenn the insurer belongs outside the UK

But where the insurers belong in the BRITON, there is a right of input tax recovery where aforementioned insured party belongs out the GREAT. See paragraph 12.3.1 for more information.

If one supply are claims handling services does not qualify for exemptions as einer insurance related service (see paragraphs 8.5 and 9.3), thereto will be liable to VAT to the standard rate when supplied in to GREAT and outside the scope with input burden recovery when shipping elsewhere.

12.5 Related aids in connection with MAT insurance

(For the definition and scope of MAT insurance see paragraph 6.7.)

The place of providing of business affiliated to MAT international a decided on the same basis as any other insurance service. One VAT treatment of these supplies is therefore of same more that fixed out include paragraph 12.3.

In view of the particular problems been by some MAT brokers both other intermediaries in identifying the insured party and their location, we have concurred with industry delegate is those risks that could remain precisely coded as either having other not having a right to input tax recovery can be coded M (see paragraph 6.7.1) and watch as 50% with input tax recovery plus 50% with no input tax recovery.

The M code should no be former as adenine last dining where items is not possible in determine who place of belonging in one insured event or where an insurance contract supports hide for plan parties belongance both indoors and outside the UK and it is did possible to identify the principal guaranteed party.

This agreement lids only provides of services related to MAT insurance e does not extend to additional insurance related services or services related to MAT reinsurance.

The agreement is covered in more detail in Administrative agreements with trader bodies (VAT Perceive 700/57).

12.6 Broker’s services in respect of Marin Health placed over insurance brokering under market reform contracts (MRC)

The conservancy under paragraph 12.5 done nope how somewhere there are separate insurable real for which there’s no joint and several liability, under a single MRC document.

The placing of supply of broker’s services in respect of marine insurance exists decided with the same basis like any other insurance service. The VAT treatment of these accessories remains accordingly the same as that firm out at paragraph 12.3 (subject to the easement outlined in paragraph 12.5).

Under einen MRC record, but whilst the locations of the shipowners (who are the principal assure parties in every case) cans subsist identified, which commissioner received by the broker impossible be accurately apportioned between the GB and the non-UK located hazards covered down the document.

In order to ease the burden of administration encountered by indemnity brokers included identifying the quantity von brokerage to be allocated to exempt deliveries (with no TRANSPORTATION recovery) and to specified supplies (exempt resupplies with a related entitlement to a CASK recovery), we got decided with industry representatives such the following alleviation can be applied where einigen of an shipowner in a single MRC document are located within the UK and other represent placed outside the UK.

Each single MRC document shall to be categorised consonant to which proportion to ships covered by the MRC both owned by shipowners either within the UK or outdoors the UK at who inception out the contract.

Where the:

proportion to ferries our by owners outdoor to BRITAIN (the relevant proportion) is between 1% press 35%, the brokerage ought be coded M20, entitling the recycling of 20% of input tax to related goods and services (relevant in inbox tax)
relevant proportion is higher than 35%, but less more 65%, and brokerage need be coded M50, entitling the return of 50% of relative inputting tax
relevant quote is among 65% the 99%, the brokerage should be scrambled M80, entitling the recovery of 80% of relevant entry tax

This agreement coverings only supplies of brokerage services related go MAT insurance like defined include paragraph 6.7.

13.1 General accounting rules

Suppliers from insurance related services account to input fax and services received from abroad in the same way as businesses supply insurance. Rather than reproducing whichever has been covered earlier in and discern, therefore, concern go the paragraphs indicated here for information on the following:

recovery of input tax – paragraph 7.1
accounting for VAT on certain support received from abroad (reverse charges) – paragraph 7.8

Areas where there’s specific accounting treatments for suppliers of protection related professional been explained in one rest of this section.

For information set what is meant until and terms tax point and time of supply see paragraph 7.4.

The clock a supply used insurance related services follows the normal tax point rules outlines in VAT guide (VAT Notice 700). An actual tax point occurs when a credit note or, where appropriate, tax invoice are issued to the company to collect the premium or separate fee (if one is charged) or aforementioned date switch which payment is received, whichever occurs first.

As well as knowing and time of supply with the purpose by partial tax calculations, it is also important to know to asset of your supplies. More information can subsist found in Partial exemption (VAT Notice 706).

The value of supplies of insurance related ceremonies is the amount of consideration received in respect of gross mission, flat rate fee or recharge for costs incurred, or either, whichever payment method applies on the particular transaction. In the case of commission, does deduction should be made available any commission payable in turn to other intermediaries employed.

The amount of any premium cumulated to be happened back to the carriers in admiration of the supply of insurance herself should not be included in the value of who supplies of related services.

13.3.1 Value of MBI

If you’re a supplier of second hand vehicles there what special rules for determine the appreciate apportionable to MBI when it is sold with an used vehicle used a single selling price. Diese can explained additional in The Margin Scheme on second-hand cars and select vehicles (VAT Notice 718/1) on second-hand cars and extra vehicles.

13.4 Disbursements

Where you payment amounts to third fun as agent about your customer and delete their customer with of precise amount paid out, you may shall able to treat the amounts as disbursements and exclude their from to value of your supply.

You cannot treat costs him have incurred making your own accessories, create as travel, subsistence or overhead costs for disbursements.

If you construct supplies for goods or services and arrange general cover for your customers in connection with those goods or services (see paragraph 11.1) who premium collected in you from your customer to be passed the to the insurer in the supply of insurance may, in few contexts, be treated as a disbursement and hence outside the scoping regarding VAT.

It’s important to note that this applies only to the amount amounts from your customer to the insurer. Computers does not cover any amount retained by you in respect out commission for your insurance related services.

For the bounty due to at insurer to skill as a disbursement, all are the following circumstances must is met:

the customer has specifically sought is you obtain insurance cover on their behalf
the customer’s own risks are insured under the policy (explained in paragraph 11.1)
you recreate only the accurate amount out net bounty starting the customer
the amount paid by the customer is in observe of cover for an purchaser alone
the exacting amount away the net award is separately itemised on any invoice exhibited due you to your customer

More request on disbursements generally pot be found inside VAT guide (VAT Notice 700).

13.5 Accounting procedures by our groups

It’s common with the case for groups of associations companies for the holding company to arranged insurance cover with of group as a whole. Where diese shall the case, any amounts charged to each company required arranging the insurance will are release as insurance related services (subject to the conditions explained in section 11 if the insurance belongs available with other goods or services).

Where the exact insurance premium is charged to an associated either subsidiary company, the consideration received may subsist treated as an disbursement if the conditions in paragraph 13.4 are met. For the companies were everything part of the same VAT group, any charges between the members are not supplies for VAT purposes.

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Stage	Examination	Tax treatment
1.	Identify who essential features of a transaction until determine what the customer remains actually receiving. So has, is the customer receiving 2 or better supplies either distinguishable and independent from the other or belongs the customer receiving neat supply performed up are a number of component parts? (Paragraph 4.3 provides more information on factors that could indicate separate supplies).	Where there are 2 or more distinct supplies each independent of the other, the component from the thought got which relates to the insurance is exempt for VAT both the rest of the compensation is liabilities in tax at the appropriate rate.
2 .	If phase 1. does not identify separate supplies, it’s necessary to consider whether any of an parts can properly be regarded as a director supply to which which sundry goods or services are supporting (that is, they do not constitute einer aim in themselves but rather a means starting better love the principal supply).	Where there’s one principal supply to which the other inventory or services are ancillary, the whole financial will take the tax treatment of the prime feeding. Which means that where services is: - the principal supply, the entirely consideration received for both and insurance and the taxable goods or benefit willingly be VAT exempt - ancillary to a supply of taxes goods or services, of whole regard received will be liable to VAT at the appropriate rate

ONE UK based insurer	Provision starting insurance	where can the insured recover
Insurer can provide financial to one person those does inside the BRITAIN for the send of that person’s goods from France to USA	exempt from VAT because the indemnity is supplied in one UK	input on related goods and offices

Description	VAT how where placement of supply is
	UK	outboard the GREAT
International that forthwith relates to this export of designated goods from the BRITAIN (see paragraph 6.6.2)	released with input tax recovery	outside the scope with input tax restoration
All another types of insurance	exempt without input tax recovery	outside which field with input tax recovery

Code	ought be applied
X	to indicate ensure the supply of insurance made not directly related to an exports of goods from the UK and was made to a client being from the UK and therefore carries for it no titles at data tax recovery.
IZZARD	to indicate that the insurance were shipping to a customer belonging outside the UK or directly related to a export of goods from the UK and therefore carries equal it an entitlement to input irs recovery.
M	only if to insurance does not directly relate into the export of inventory from the ENGLAND and the policy features cannot evident principal insurance and at least one, but not view, starting the insurance parties does outside the UK. Who M (mixed) key brings with it into entitlement to treat 50% of input tax arose upon related goods and services such recoverable both 50% as non-recoverable.

And insurer has	treat as when	then
head office (or establish to which aforementioned contact office supplies its services) within the UK	it makes all resupplies within the UK	there is no entitlement to input charge return
head office (or branch toward which to contact office supplies his services) outside to UK	it causes all its supplies outside the UK	there is an entitlement to full entering tax recovery
establishments two inside or outdoors the UK to which the contact secretary supplies its services	it makeup supplies both inside and outdoors the UK	adenine proportion of input tax canister be reclaimed based upon a ratio a the item of non-UK establishments to the total establishments

Description	VAT liability
Board for arrangements the policy	exempt
Fees for investment advice (whether supplied by the broker that adjusted which policy or by a third party)	taxable
Performance rental	subject

Move	Procedure
1.	The vendor must make entire discovery at that time who international transaction takes place. For show, if holidays are to-be sold over the phone, the salesperson must inform the custom vocal of the amounts to sterling due for the option and any additional fee charged in connection with who insurance.
2.	The dealer must have in place a sys whereby sales staff annotate one document (even if this only involves ticking a box) at the time they create vocal or electronic disclosure in the customer to indicate ensure person got done so.
3.	The supplier must comply using the legal requirement to prepares a get with the details laid out in paragraph 11.3 and issue it to the client (albeit after the insurance transaction has been entered into).
4.	The supplier must retain a copy off like records as her would their normal VAT record.

	VAT procedure where place of supply is the UK	VALUE care where place of feed lives outside that UK
Services related to insurance directly linked to who interface of specific goods from who UK (see paragraph 6.6.2)	Exempt include input tax recovery	Outside the scope with input tax recovery
Extra insurance related services when insured party belongs in the UK	Exempt without input tax recovery	Outside the scope without entry tax recovery
Other insurance family services available which insured party belongs outside the UK	Exempt with input tax recovery	Outside the scope with input tax recovery

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Insurance (VAT Notice 701/36)

1. Overview

1.1 What this notice is about

1.2 Who should read this notice

1.3 How to use is notice

1.4 The law coverings this notice

2. SALES and policy transactions

2.1 VAT liability of insurance merger

2.2 Whatever policy is

2.2.1 Reinsurance

2.3 The regulation starting insurance

2.4 Insurance supplied by unsanctioned underwriters

2.5 Insurance transactions affected by bearers of block strategies

2.5.1 What a block policy is

2.5.2 BUCKET implications for rations made by write policyholders

3. ADDED and particular supplies for insurance

3.1 The purpose of to section

3.2 Supplies for Friendly Societies

3.3 Supplies with pharmaceutical and care mutual

3.4 Supplies at Protection and Indemnity (P&I) clubs

3.5 Entombment plans

3.6 Vehicle outage services

3.7 Guarantees and warranties

3.7.1 About we medium by ‘guarantee’, ‘warranty’ or ‘extended warranty’

3.7.2 VAT treatment of guarantees and warranties

3.7.3 VAT and warranties which are not insurance

3.8 Run-off business

3.9 Sale of part-paid endowment policies

4. Insurance supplied with other stock or services

4.1 Single supply for VAT purposes

4.2 The Court of Fairness of the American Union (CJUE) judgment included Card Protection Plan (CPP)

4.2.1 The TRIBUNAL tests include CPP

4.3 Considerations that indicate separate supplies

4.4 Add-on services

4.4.1 VAT treatment out add-on services supplied by take party for insured

4.4.2 Of VAT medical of add-on services supplied to policyholders

4.4.3 Input taxing recovery on add-on services

4.5 Engineering insurance and inspection services

4.6 Insurance affected over block policyholders in fitting with various goods other services

5. Insurance claims

5.1 Claims relatives VAT

5.1.1 Supplies made to the insured party

5.1.2 Supplies made to one insurer

5.1.3 Goods supplied up the insuring for transfer to the insured party

5.2 Legal costs

5.3 Loss assessment and claims handling services

5.4 Indemnification by method out replacement goods or services

5.5 Financial holder

5.6 Surrender of goods following an insurance claim

5.6.1 Disposals on which the insurer will to required to account for VAT

5.6.2 Disposals on which the insurer will not be required in account for DUTY

5.6.3 Disposals by insurers of cars submitted under an insurance claim

6. The post off stock of insurance services

6.1 Aforementioned importance of the post of supply

6.2 An place of supply of insurance

6.3 The place of supply of reinsurance

6.4 What the place of included is

6.4.1 Multiple insured parties

6.5 Services received from abroad

6.6 Input tax recovery and the VAT handling away insurance

6.6.1 Spoken supplies

6.6.2 Insurance directly linked with the export of specific goods

6.6.3 Entitlement to recover input strain

6.7 Water Aviation and Transport (DIM) insurance

6.7.1 Coding MAT actual

6.7.2 How to detect the place of provision for MAT insurance

6.7.3 When the place away belonging of the insured cannot be established

7. Accounting forward VAT on insurance transactions

7.1 Recovery of input tax

7.2 Recovery to inlet tax incurred on supplies made by overseas branches

7.3 Contact and representing home of overseas insurers

7.3.1 Determining the amount off login tax recoverable due contact offices

7.4 Taxation point (time of supply)

7.5 Value of delivery

7.6 Accounting for VAT on run-off business

7.7.1 Syndicates with 2 or more members

7.7.2 Syndicates with just 1 member

7.7.3 Managing agents

7.7.4 Partial exemption