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Identify the essential features of a transaction to determine that the customer is actually receiving. That is, is the customer receiving two or more supplies each distinct and independent from the other or is the customer receiving one supply made up of a number of component parts? Where there are two or more distinct supplies each independent of the other, the part of the consideration received which relates to the insurance is exempt from VAT and the rest of the consideration is liable to tax at the appropriate rate.
Which means that where insurance is: Some of the factors that could indicate separate rather than composite supplies: Where the add-on services are supplied by a third party to the insurer for onward supply to the policyholder under the contract for the main supply of insurance, the VAT treatment of the first supply may differ from that of the second supply.
More information on this is explained in section 8 and section 9 and, on helplines specifically, in paragraph This is because the VAT incurred on the add-on service directly relates to your exempt supply. More information on exempt supplies and the recovery of VAT can be found in Notice partial exemption.
Inspection services supplied on their own are subject to VAT at the standard rate. Since 1 Aprilinsurers have been required to apply normal VAT rules to supplies of engineering insurance with inspection services, prior to this time the tax treatment was the subject of a special administrative agreement.
Depending on the circumstances under which you make your supplies, any of the following tax treatments could apply.
You could be making: Guidance on determining who is receiving particular supplies made in connection with insurance claims is given further on in this section in paragraphs 5.
Where the insured party is able to recover the VAT charged in respect of such supplies from us, the insurer will normally be responsible for paying only the net amount due less any excess payable by the insured party under the insurance claim.
Where costs are incurred in respect of an individual claim for example, legal costs incurred where the insurer is in dispute with the policyholder over the legitimacy of the claim any VAT on those costs will be directly attributable to the associated supply of insurance and the recoverability of any VAT charged will depend upon whether or not the relevant supply of insurance gives a right to input tax deduction.
For more information on establishing whether supplies of insurance give a right to input tax deduction please refer to section 6 of this notice. For more information on exemption and input tax recovery in general please refer to Notice partial exemption.
In these circumstances the insurer may choose to recover the VAT charged on the goods as input tax and account for output tax on the cost price when the goods are handed over.
Alternatively, the insurer may refrain from claiming the VAT charged and, therefore, not be liable to account for output tax when the goods are transferred to the insured party. In the case of subrogated claims though that is, claims where the insurer exercises their right to pursue or defend a claim against a third party in the name of the insured party supplies of legal services in connection with those claims are made to the insured party and not to the insurer.
They may also be contracted to provide claims handling services information on the VAT treatment of such services can be found in paragraph 9. In normal circumstances, loss adjusters and similar experts are contracted to act on behalf of the insurer and the supply of their services is therefore made to the insurer rather than the insured party making the claim.
Unlike loss adjusters and other similar experts, but loss assessors are normally appointed by and act in the interest of the insured party and the supply of their services is therefore made to the insured party rather than to the insurer.
In normal circumstances the supply of these replacement goods or services by a third party supplier is seen as being made to the insured party. In some instances, but the facts of the case, including the terms of the insurance contract, will mean that the supply of the replacement goods or services is made to the insurer and not to the insured party.
The money paid by the insurer in settlement of the claim is therefore outside the scope of VAT.
In these instances the damaged goods will be surrendered to the insurer and the insurer will be able to sell them on and keep the proceeds. The VAT treatment of the consideration received by the insurer in respect of these goods will depend upon whether or not the insured party would themselves have been liable to account for VAT on the sale of the goods.
The insurer will need to: VAT had been recovered in full when the goods were purchased only a proportion of the VAT had been recovered because of partial exemption restrictions there was an entitlement to VAT recovery but no VAT was recovered because the business did not hold a valid tax invoice 5.If you are new to this website take the Tour.
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