VAT Services for Insurance Providers

VAT and Insurance Premium Tax for Insurance Providers

Whilst insurance transactions are exempt from VAT, output tax may be due on some insurance-related services. Therefore, insurance providers must take steps to ensure they are aware of their VAT responsibilities and remain compliant with the relevant VAT legislation. Identifying whether a supply falls under exempt insurance or related services can be challenging without expert help.

At The VAT People, we have significant experience advising insurance providers of their specific obligations, and helping them to claim back VAT wherever possible. We understand the complexities of services supplied in the context of VAT and insurance.

We have helped many insurance businesses to understand their VAT responsibilities and are happy to answer questions or offer advice. The supply of insurance involves distinguishing between exempt supplies of insurance and related services, which may or may not be subject to VAT, and our experts can help to make sure you understand these rules clearly.

Contact The VAT People by calling us on 0161 477 6600, or fill out an online enquiry form to request a call back at your convenience.

How we can help you understand VAT on insurance

The VAT People has assisted many businesses to meet their VAT obligations, and our experience means that we are always aware of the most up-to-date regulatory requirements to ensure that your business remains compliant.

We can advise you on which services will qualify for VAT exemption, and under what circumstances input VAT incurred can be recovered. This is sometimes difficult to distinguish - for example, if the collection of insurance premiums is a service provided in conjunction with other exempt services, this can determine whether or not this service is exempt. While standalone phone helpline services are subject to VAT, those of which the predominant nature is exempt (such as insurance-related intermediary services) are similarly exempt.

Additionally, it is important to understand that insurance premium tax (IPT) is not the same as VAT. IPT is applied at a standard rate of 12% or a higher rate of 20% for specific types of insurance. IPT cannot be reclaimed on VAT returns, and IPT and VAT are not paid together for the same insurance product. At the VAT People, our careful attention to detail means that you can trust our advice and meet the relevant legal requirements.

Our success on behalf of many clients demonstrates the value of our friendly and professional approach. We ensure that any advice and guidance we provide is practical, easy to understand and straightforward to implement, which means that you can meet your VAT obligations with as little stress as possible.

Understanding VAT on Insurance

As an authorised insurance provider, all transactions related to the provision of insurance are VAT exempt. In fact, certain additional services are considered as insurance for the purposes of VAT exemption, whether they are delivered by an authorised insurance provider or not. For example, certain funeral plan contracts or vehicle breakdown cover can be seen as insurance even if they are delivered by providers that are not authorised (or have benefitted from an exemption from the need to be authorised). As such, they are not liable for VAT.  However, despite being exempt from VAT, unauthorised insurers may face prosecution under the FSMA. Extended warranties are unlikely to be recognised as insurance by the Financial Conduct Authority (FCA) and are subject to VAT at the standard rate.

Any VAT on insurance-related services is due where the services are consumed, not where they are supplied. However, the country where the services are supplied can still determine whether or not you can recover VAT on any costs related to supplying insurance or related services. Insurance and reinsurance transactions are generally exempt from VAT, but this potential ambiguity highlights the importance of understanding the specific VAT implications.

Insurance premium tax is a separate tax applied to insurance premiums and cannot be reclaimed on VAT returns. Understanding VAT on insurance and how it relates to IPT is crucial for compliance and financial planning.

These regulations can be difficult for businesses to navigate, but legal compliance is of utmost importance.