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VAT on insurance excess

Does the insurance company cover the VAT?

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Hi

I have a client who does building work and invoices insurance companies for work of this type. The client's customer has a £250 excess so I assumed my client would invoice the insurance company as follows;

Net           £2,000.00

VAT.           £400.00

Total.        £2,400.00

Excess.      (£250.00)

Total due   £2,150.00

Insurance company states that the excess should be taken off the net amount though so they pay less VAT and less cost of course overall.

I'd be grateful if anyone could clarify who is correct and if possible provide a link to the VAT notice that covers this.

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RLI
By lionofludesch
23rd Oct 2019 15:36

Assuming the insured is not registered (fairly key piece of information missing), insurance company is talking out of its corporate backside.

The insured should pay no more than the excess, £250.

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Replying to lionofludesch:
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By Jakarmi
23rd Oct 2019 19:27

Quote:

Assuming the insured is not registered (fairly key piece of information missing), insurance company is talking out of its corporate backside.

The insured should pay no more than the excess, £250.

Sorry, it does help if I provide all of the info.

Customer themselves aren't VAT registered. It looks like a residential property where the bathroom has had a leak.

The insurance company want my client to bill them their portion and the customer the £250 separately.

My understanding is that the customer should invoice the insurance company the full amount (with VAT charged on all of the work) and then deduct £250 off the gross amount. The customer then would get a bill of £250 without VAT.

The insurance company want my client to bill the customer £250 with no VAT but not charge VAT to them on the £250 part of the invoice as well. To me that is wrong as there should be VAT charged on all of the work completed (and I think the insurance should be paying it all too)

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Replying to Jakarmi:
Hallerud at Easter
By DJKL
24th Oct 2019 00:35

I would only do one invoice, net, vat, gross

Below that I would have two lines:

Due from Insurance Co
Due from Insured £250.00
Total (which of course equals the gross)

I would issue two copies.

The insurance company are wrong.

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Replying to DJKL:
RLI
By lionofludesch
24th Oct 2019 08:41

Sound idea.

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Replying to Jakarmi:
RLI
By lionofludesch
24th Oct 2019 08:46

Quote:
....... (and I think the insurance should be paying it all too)

It's more simple than that.

The bill is £2000 + 20% VAT.

The insured is £2400 out of pocket.

He has agreed to pay £250.

The insurance company pays the rest.

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Hallerud at Easter
By DJKL
23rd Oct 2019 15:38

Who pays your client the £250 excess? Do they pay them the vat on the £250 excess, ie. is he/she paid £250 plus vat?

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Replying to DJKL:
RLI
By lionofludesch
23rd Oct 2019 15:59

If the insurance company want the insured to pay £300, that's definitely wrong.

It's either £250 or £650, depending on whether the insured is registered or not.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
23rd Oct 2019 16:06

Given building works it actually gets even more complicated re registered, commercial property used in trade, tax options re let property and residential property.

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Replying to DJKL:
RLI
By lionofludesch
23rd Oct 2019 16:13

Maybe - if the insured has irrecoverable VAT. But that's not the builder's problem.

Nevertheless, that doesn't explain the insurance company's assertion.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
23rd Oct 2019 16:48

It sort of is if the insured is paying one invoice and insurance co is paying another and builder needs to know who gets billed what.

Much simpler if he can bill insured in full and insured makes recovery from insurance company as appropriate.

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Replying to DJKL:
RLI
By lionofludesch
23rd Oct 2019 18:35

Quote:

It sort of is if the insured is paying one invoice and insurance co is paying another and builder needs to know who gets billed what.

Much simpler if he can bill insured in full and insured makes recovery from insurance company as appropriate.

You're right. Whilst I'm prepared to help, ultimately, as builder, I'd be looking to the insured for the full £2,400.

On the other hand, I'm not prepared to put up with half-witted criticisms of my billing from knaw-nowt insurance clerks.

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