Commentary

V4.122 Exemption—the provision of insurance or reinsurance

Part V4 Exemption, zero-rating and reduced rates

V4.122 Exemption—the provision of insurance or reinsurance

V4.122 Exemption—the provision of insurance or reinsurance

The ECJ has held that the effect of art 135(1)(a)1 is that a member state cannot restrict the scope of the exemption for insurance transactions exclusively to supplies by insurers who are authorised by national law to pursue the activity of an insurer2. Consequently, and with effect from 1 January 2005, the UK legislation dealing with exemption in relation to insurance was amended to remove any reference to the authorisation of insurers. Exemption now applies simply to 'Insurance transactions and reinsurance transactions'3.

Place of supply

A supply of insurance may only be exempt for UK VAT purposes if the place of that supply is in the UK. Where the place of supply is outside the UK, the supply will be outside the scope of UK VAT. The establishing of the place of supply is important, since the right (if any) to recover related input tax is dependent on it4.

The place of supply of insurance services is set out in the tables below.

The concept of 'belonging' is described in detail in V3.183.

Supplier belongs in UK
Place of supplyLiability
Customer belongs in UKUK (VATA 1994, s 7A(2)(a), (b))Exempt (VATA 1994, Sch 9, Group 2, item 1)
Customer belongs in another member state (privatea)UK (VATA 1994, s 7A(2)(b))Exempt (VATA 1994, Sch 9, Group 2, item 1)
Customer belongs in another member state (businessb)Other member state (VATA 1994, s 7A(2)(a))Outside the scope of UK VAT
Customer belongs outside the EU (privatea)Outside the EU (VATA

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