Exemption ― insurance ― overview

Produced by Tolley
Exemption ― insurance ― overview

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exemption ― insurance ― overview
  • VAT treatment of insurance products
  • What is insurance?
  • Block insurance products
  • Run-off business
  • Insurance claims
  • Legal costs
  • Loss adjusters and assessors
  • International transactions
  • VAT accounting
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

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 Exemption ― insurance ― brokers and agents guidance notes.

VAT treatment of insurance products

Supplies of insurance products within the UK are exempt from VAT. Following the decision in Card Protection Plan to the effect that supplies of insurance by unauthorised insurers were exempt the UK legislation was amended to remove the restriction which limited exemption to supplies by specified bodies.

What is insurance?

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 or money’s worth (VATINS2210). This was expanded to include three specific points:

  1. the contract must provide that the insured will become entitled to something on the occurrence of some event;

  2. the event must be one which involves some element of uncertainty (VATINS2220);

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