Exemption ― insurance ― specific transactions

Produced by Tolley

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

  • Exemption ― insurance ― specific transactions
  • Endowment policies
  • Engineering insurance and inspection services
  • Friendly societies
  • Funeral plans
  • Guarantees and warranties
  • Medical / welfare funds
  • Insurance provided with goods / services
  • Disclosure provisions
  • Add-on services
  • More...

Exemption ― insurance ― specific transactions

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 specific types of insurance transactions and the associated VAT treatment. This note should be read in conjunction with the Exemption ― insurance ― overview and Exemption ― insurance ― brokers and agents guidance notes.

Endowment policies

The sale of part-paid endowment policies are not exempt under the insurance exemption due to the fact that the risk covered by the underlying insurance remains with the original policyholder. However, this will be treated as a finance transaction so any consideration received will be exempt.

Engineering insurance and inspection services

Businesses may offer engineering insurance that is intended to protect large capital items of machinery against damage or faults. The insurer may also offer the customer an inspection service in connection with the insurance product which may be used to reduce claims or the level of cover offered.

If the inspection services are provided separately and are not incidental to the supply of the insurance, they may be liable to VAT at the standard rate. If they are supplied in connection with the insurance, then the business needs to ascertain whether a single composite supply of exempt insurance has been provided. Please see the Single or multiple supplies ― overview guidance note for more information on what constitutes a single supply for VAT purposes.

Friendly societies

These types of organisations normally provide insurance against accident, sickness, redundancy, old age, etc. They are not for profit organisations and their insurance capital is derived from the payments made

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