Share this content

Total Loss insurance claim with no VAT

Didn't find your answer?

Hi, can I ask for some advice from some people that know a little about VAT…

My family was recently involved in a major accident not at fault of mine but the speeding driver. This left the car written of…

My car was a personal hire contract lease and would never own it. (Renting it). My insurance company valued the car at 29k but will only pay VW 24k as they say they have to minus the VAT. I’m a little confused about this as I’m jot vat registered nor do I have a business! VW Want a settlement of £26875 so I have a short fall unless they pay out with the VAT. 

Please can someone with vat knowledge advise.

Replies (9)

Please login or register to join the discussion.

avatar
By Tax Dragon
01st Jul 2021 06:34

Is the difference VAT? As you say, 24k+VAT is c29k, so where does £26875 come from? Is the difference to do with (the value of) your rental payments, rather than the value of the car/VAT? (I'm just guessing - you're the one with the facts.)

Thanks (0)
Replying to Tax Dragon:
Psycho
By Wilson Philips
01st Jul 2021 07:18

It could be as simple as (I too am guessing) the fact that VW's opinion of the car's value is not the same as that of the insurer.

To the OP, it is not so much a question needing VAT advice, but to tell the insurers that they don't know what they're talking about. If you are unable to recover the VAT - whether because you're not registered or the VAT is blocked - the claim should be for the amount of your loss. The insurer ought to be happy that VW are seeking less than their own valuation. You need the help of a solicitor (or perhaps start at Citizens Advice), not an accountant.

Thanks (0)
Replying to Wilson Philips:
avatar
By Rammas
01st Jul 2021 11:23

Would this matter if it’s a lease car and I’m not the owner VW are and they a vat registered? All my payments to them have been inclusive of vat…

Just thinking if there is any way the insurance can say as they are paying the lease company not be and they are vat registered then they will payout ex vat. Hope that makes sense.

Thanks (0)
Replying to Rammas:
avatar
By Leywood
01st Jul 2021 11:42

Have you read the other responses?

Only I cannot see a thank you to anyone for already answering your question.

Thanks (1)
Jason Croke
By Jason Croke
01st Jul 2021 07:39

Doubt this is VAT, more to do with what the insurers are prepared to offer, set against the remaining months of the contract for the now-defunct car.

Consider GAP insurance when having a personal lease, whether the car is written off or not, you are still liable for the remaining contract value (unless the insurance settlement covers that value) and GAP insurance covers that gap. If the insurer has stated to you the shortfall is "because of VAT" then ask them to clarify why they are not funding the VAT element as this was a personal lease contract and insurance is meant to cover your loss, including VAT.

Link below to FAQ on personal lease/insurance settlement.
https://www.carlease.uk.com/info/help-my-lease-car-has-been-writtenoff-a...

See it another way, if you had bought the car via a bank loan and car was written off, you would still have a gap between what you owe the bank and what the insurers will pay for it, you still owe the bank even though you no longer have a car.

Thanks (1)
RLI
By lionofludesch
01st Jul 2021 09:00

With whom is the insurance company contracting?

If it's you, the OP, they should be paying you any VAT. If it's the lessor, they (probably) shouldn't.

Of course, the VAT line could be just an excuse......

Thanks (1)
avatar
By Paul Crowley
01st Jul 2021 09:00

Second hand cars do not have VAT
You are arguing with the insurance company the trade-in value of a second hand car.

Thanks (0)
Replying to Paul Crowley:
RLI
By lionofludesch
01st Jul 2021 09:02

Not sure that's true for a leased car. Surely he's being asked to pay the remaining rentals.

What does the leasing contract say?

Thanks (0)
Jason Croke
By Jason Croke
01st Jul 2021 11:12

Just a thought on this.....

When any contract is terminated early, such as when a lease car is written off, previously the VAT treatment was the remaining payments were outside the scope of VAT as there was no supply. We saw this often when cancelling a mobile phone contract early, the cost to terminate worked out as being the net monthly fee x remaining months left of contract.

But then HMRC updated their guidance last year and early this year, HMRC now consider termination of contracts and liquidated damages as being the same VAT status as the underlying contract, so if you have a mobile phone contract and terminate it early, it will now be gross monthly fee x remaining months left on contract.
https://www.gov.uk/government/publications/revenue-and-customs-brief-12-...

It might therefore be possible, that the insurance company are assuming the remaining lease contract value/monthly payments are outside the scope of VAT, hence the insurers offering a VAT exclusive amount on the assumption the termination payment from the lease company will be without VAT.

Thought I'd put it out there as a possibility, without knowing the details of the lease agreement, etc it is difficult to do anything than guess what it could be.

Thanks (1)
Share this content