Why Do Insurance Companies Not Pay Vat

Macc registered user.

Why do insurance companies not pay vat. The issue was whether various back office services provided by arthur andersen to a life insurance company were exempt from vat. Not paying corporation tax failing to pay paye and missing vat payments should not be taken lightly as the impact on companies and directors can be very limiting. In the meantime i thought i d talk about insurance or when it s not insurance and when it s exempt from vat. An insurance company is vat exempt meaning it does not charge or reclaim vat.

I do not know who has advised you of this and whilst i agree in theory hmrc are at a loss as you have failed to pay the vat you should have charged at the time. Why do you expect the vat when no repairs have been undertaken and no vat had been incurred think about it. So it seems that somewhere along the road either the insurance company believes their customer can reclaim the vat or more likely they just got it wrong. Where the insured is not vat registered then their loss is the full amount of the bill and the insurance company pays the full amount.

Vat returns will be filed quarterly unless a business is in trouble with hmrc or receives regular repayments. Insurance transactions are exempt from vat. Not the most exciting of subjects but at least it s change from the budget. Normally vat cannot be recovered on goods and services bought in to make exempt supplies see paragraph 7 1for more information.

Therefore if they are invoiced for the work they pay the vat inclusive amount and can t reclaim it. One of the most common queries from businesses and accountants is whether they have to charge vat on insurance. And hmrc want this now along with any penalties and interest whether the insurance company can offset this against their vat charges is immaterial as you have failed to undertake the obligations required by you. These included accepting applications issuing managing and cancelling insurance policies and managing claims.

In carrying out these tasks the company had authority to make decisions binding on the insurer. The property owner can t claim vat on an invoice made out to the insurance company this is called fraud. Payments must be made. Your insurance company will not pay out vat where no vat has been incurred by you.

Of course it s what the policy states that. What the insurance company are saying is that if you had a vat registered builder who could recover the vat then he would charge you net plus vat and i am assuming you are vat registered you could recover the vat if it relates to you making taxable supplies. The ecj held that arthur andersen was not acting as an. Where the insured is a vat registered trader and can reclaim the vat then he is out of pocket by the net amount and that s what the insurance company pays out.