After I successfully fought off a complaint to my professional body with the help of solicitors retained by my insurers, the solicitors have sent me a bill asking me to pay the VAT only as their net fees have been/will be settled by the insurers. In their covering letter the solicitors stated that all VAT-registered insureds are asked by their insurers to pay the VAT element as this can then be recovered from HMRC. The insurers themselves have said nothing about this. While this appears to be an eminently reasonable arrangement I have not come across it before, so would appreciate confirmation that HMRC are in fact happy with such arrangements. Thanks
Replies (4)
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The insured party can recover the VAT.
It is common practice for a claimant to be invoiced for the VAT only plus, in some cases, an excess, when the bill is being paid by an Insurance company.
In VAT-speak, the recipient of the supply is the persoon who can recover the VAT as input tax. The Insurance company, being exempt, cannot recover the VAT. So, they arrange that the solicitors, in this case, split the invoice as you described. (The same practice occurs when damaged cars are repaired. This is why the claimant is asked whether he/she is VAT-registered.)
Not quite the right explanation but the right result
You are insured for your loss
As you are VAT registered you can recover the VAT
Ergo, the loss to you is the net, paid direct by your insurers.
VAT
Claimant is asked whether he/she is VAT-registered.If the Claimant is VAT registered then he/she can recover this back from HMRC. But if he/she is not a VAT registered then - can't recover meaning that it will be a expense. Whether this would be tax admissible?
Please Advice