I have a lease hire car for personal use, leased with Kia Contract Hire. The car was recently stolen, and the insurance company have paid a settlement figure direct to Kia Contract Hire. However, they have deducted 20% for VAT. When questioned, they said they never pay the VAT if it is to a finance company as they have already claimed it when purhasing the car. Kia say they have never heard this and expect the full payout. As both parties are adamant they are right, it is now me left with a hefty shortfall. So who is wrong here? Surely it is not for me to make up the VAT shortfall?
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Replies (7)
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What on earth do you think anyone here can do? You’ve got a dispute with your insurer so suggest you contact a solicitor.
You'll need to liaise with a solicitor as this is a legal matter or if your complaint to the insurer fails then you always have the Ombudsman for insurance disputes.
Couple of things though....when a lease car is stolen, it is effectively a termination of the lease, termination of the lease is subject to VAT as it is seen as a continuation of the original supply. What does your lease agreement say about stolen cars?
The issue is certainly with your insurer and not with Kia, Kia are the injured party here as their car has been stolen, there may be a dispute between value that Kia want for the vehicle and the value the insurer is willing to pay, for that you needed GAP insurance.
But from a simplistic starting point, insurance is meant to cover your loss, so if you are somehow paying for an element of VAT out of your own pocket, that would suggest you are not being covered for the loss, hence why this is a matter between you and the insurer.
I'm not really grasping the details of the contract but is it for you to reclaim the VAT from the VATman?
If the contract were for, say, rebuilding a wall instead of a car lease, that's exactly what would happen.
Establishing who is supplying what to whom is key.
It very much depends on the wording of your insurance policy. Interesting ombudsman decision here https://www.financial-ombudsman.org.uk/decision/DRN8607381.pdf but I understand (although not researched) there are other decisions that go in favour of the insurer.
Bit of a longshot, but are you yourself VAT registered? I'm wondering whether the insurance company might hope you will pay the VAT and then be able to reclaim it.
The Financial Ombudsman will look into insurance matters. If the insurers are trying it on they'll soon cave in when you give them an Ombudsman case ref number. We had it with Openreach trying to charge for a telegraph pole for which there's a government subsidy of £3k available. Soon capitulated when told Communications Ombudsman was involved.
Thank you. No, I'm not VAT registered and the insurance company (LV) are clear they do not pay VAT when paying direct to VAT-registered finance companies rather than indiviuals.
