VAT for Insurance

The biggest VAT issue in the insurance sector is the fact that VAT cannot be reclaimed on costs that relate to exempt sales. VAT costs may be kept to a minimum by:

• ensuring that VAT is not charged by suppliers who do not need to add VAT to their bills;
• attributing VAT on costs to transactions that give the right to reclaim VAT;
• ensuring that all transactions that give VAT recovery rights are identified and properly valued;
• using a VAT recovery method that is appropriate for the business and which delivers the correct outcome without being administratively burdensome;
• applying VAT self-assessment rules correctly, for example on imported services; and
• structuring and processing insurance claim related costs to allow recoveries by the insured.

CVC currently acts for a diverse range of organisations in the insurance sector, including a large number of Lloyd’s syndicates and syndicate managers. In our experience, ensuring proper compliance and maintaining professional relationships based on trust are the main aims of our clients and HMRC. We have delivered large VAT savings to clients in this sector but all have been agreed with HMRC without conflict.

A number of changes in VAT accounting rules that occurred on 1 January 2010 impacted on businesses in this sector. The UK VAT rate increase to 20% due on 4 January 2011 will also have a major impact and we are working with businesses to try and find VAT savings before the rate increase has effect.