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Client reselling insurance - VAT treatment?

Client reselling insurance - VAT treatment?

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Hi,

I have a client that sells insurance to his customers as part of his service - so he invoices say, £10,000 for his service plus £250 for insurance and adds IPT at 6% - so total invoice amount before VAT is £10,265 (the insurance broker then invoices for the cost of the insurance and also passes on the £15 IPT).

Am I right in thinking that VAT should be charged on £10,250? .....a lot of forum posts suggest that only the £10K is Vatable.

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Portia profile image
By Portia Nina Levin
25th Apr 2015 17:27

(No subject)

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By Numberwang
25th Feb 2015 13:52

ok....

ok...

This is a removals company, they offer insurance on the goods that they move.

The insurer passes on the IPT to the government on their behalf.

On the clients invoices, VAT is charged on the service but not on the insurance or the IPT (effectively, just on the £10,000).

I'm only questioning this as the previous accountant assumed that IPT *is* VAT and included the IPT on the VAT returns (...yeah, I know!).

So, without going into very much more detail - it looks like they've been treating this correctly as per your second treatment.

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Portia profile image
By Portia Nina Levin
25th Apr 2015 17:27

(No subject)

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By Numberwang
25th Feb 2015 14:16

ok....

Portia Nina Levin wrote:

Numberwang wrote:

The insurer passes on the IPT to the government on their behalf.

IPT is a liability of the person that actually sold the insurance policy; the one you describe as the insurer. It is just that they show the IPT as a separate line to make the insurance seem cheaper.

The cost of the insurance is £265, in your example.

The detail that you need to go into is who is the insured party? The client or the removal company?

If the former, the £265 insurance is a disbursement and £10,000 is the amount on which VAT is charged. If the latter £10,265 is the amount on which VAT is charged; being the consideration for standard-rated insured move.

 

Yes, I take your point - the IPT is merely being passed on - I assume that the client is the insured that is how it is dealt with on the invoice.......I'll check with the client.

 

Thanks!

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RLI
By lionofludesch
25th Feb 2015 14:49

Be honest ......

Is the reality the client is itemising part of his charge as insurance so that his fees look less than they really are ?

If so, it's not really insurance is it ?   It's part of the removal fee and standard rated.

Am I going to bill part of my PII/motor/property insurances to clients and avoid VAT on that part of the bill ?  Er - no.  I wouldn't be confident that would work.

 

 

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By Numberwang
25th Feb 2015 14:59

Nope

lionofludesch wrote:

Is the reality the client is itemising part of his charge as insurance so that his fees look less than they really are ?

If so, it's not really insurance is it ?   It's part of the removal fee and standard rated.

Am I going to bill part of my PII/motor/property insurances to clients and avoid VAT on that part of the bill ?  Er - no.  I wouldn't be confident that would work.

 

 

The insurance is specifically set up for each customer - this is totally different to annual PII etc, this is an additional service that the client offers to their customer to cover specific goods being transported - same as if you buy a PC and PCWorld try and sell you a warrantee.

I have invoices from the insurance broker that backup the sales invoices.

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RLI
By lionofludesch
25th Feb 2015 15:03

OK

Fair enough.

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By Take VAT
11th Apr 2015 00:17

Late to the party
But I think the insurance element may be exempt but not as an insurance policy. You client can't provide insurance as it's not an insurer, but if he arranges it separately for each client and gathers the information to do so that sounds like the service may be a separate supply of insurance intermediary services. Just another line of defence if you are ever asked!

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