The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of the VAT treatment of insurance products and should be read in conjunction with the Insurance ― specific transactions and Insurance intermediaries and agents guidance notes.
Supplies of insurance products within the UK are exempt from VAT. However, the exemption only extends to supplies of insurance that are made by businesses that are authorised, or exempted from being authorised, under relevant UK legislation. However, it should be noted that the CJEU ruled in Card Protection Plan that supplies of insurance by unauthorised insurers could also be exempt from VAT even though under Financial Services and Markets Act 2000 (FSMA 2000) (subscription sensitive) it is illegal.
HMRC has stated that it will refer any cases it finds of unauthorised insurers providing insurance products to the Financial Conduct Authority (FCA) so they can investigate the provider.
There is no legal definition regarding what constitutes insurance. HMRC has devised a ‘working definition’ of the criteria to be used to establish what should be treated as insurance as a result of the Medical Defence Union case. The following has been extracted from VATINS2205:
“The case involved the Medical Defence Union (MDU) against the Department of Trade, and sought to establish whether the MDU were carrying on an insurance business. To resolve this it was necessary to determine if the contract between the MDU and its members was one of insurance. The judge decided that if there was to be a contract of insurance there had to be, on the occurrence of some event, a right to receive money
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