Insurance Claims - Legal Services

Insurance Claims - Legal Services

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VAT notice 701/36 5.1.1 Supplies made to the insured party states:

"Where supplies of claims-related goods or services are made to the insured party and the claim relates to their VAT registered business, any VAT incurred on those supplies may be deducted as input tax subject to normal rules.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."

e """Where the insured is unable to recover the VAT the Insurer will pay the full amount but cannot recover the VAT as the supply is to the insured.  the insured is not out of pocket.

But what if the insured is partially exempt (let's say 50%).  If we bill the VAT to the insured (say it is £200) they can only recover £100 and are out of pocket.  If the insured only pays us £100 and the insurer pays us the £100 balance then surely the insured can only recover 50% of the £100 and are now out of pocket by £50. How could we ensure the insured does not make a loss? 

 

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By Stuart.thomson
28th Nov 2014 23:18

You will only make a loss if you have not claimed enough under your policy to cover for irrecoverable VAT. The policy should pick up this proportion subject to limits. HMRC will pay the VAT back as normal ie using a partial exemption method.

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