Insurance Companies and VAT

Discussion in 'Accounts & Finance' started by europeanprinter, Jun 11, 2010.

  1. europeanprinter

    europeanprinter UKBF Newcomer Free Member

    Posts: 2 Likes: 0
    Hello

    I am a Spain based print broker. We have relationships with printers around Europe (as our name hopefully suggests) and the UK has been a good market for us in the past.

    Recently a friend told me that UK based insurance companies cannot claim back the VAT they pay for goods and services. I'm not sure why they have been singled out in this way - but I imagine that there is a reason...

    Thus, I imagine, when a UK insurance company has their printing done, if they do so in the UK, they pay the VAT on top and simply have to carry the charge.

    When we invoice UK companies we do not have to levy the Spanish VAT.

    It would make sense to me that UK insurance companies should investigate this.

    Can anyone confirm or clarify the situation with VAT for this sector? I will initiate a marketing campaign to this sector if I can establish the reality of the situation.

    Many thanks in advance for any advice.

    Steve Cameron
    Posted: Jun 11, 2010 By: europeanprinter Member since: Jun 11, 2010
    #1
  2. Williams lester

    Williams lester UKBF Regular Full Member

    Posts: 2,254 Likes: 344
    Insurance services are exempt from VAT and for any business providing solely these services there is no taxable supply. Where there is no taxable supply there can be no reclaim of any VAT on costs incurred.
    Posted: Jun 11, 2010 By: Williams lester Member since: Oct 16, 2008
    #2
  3. elainec100@cheapaccounting

    elainec100@cheapaccounting UKBF Regular Full Member

    Posts: 13,271 Likes: 2,871
    Last edited: Jun 11, 2010
    Posted: Jun 11, 2010 By: elainec100@cheapaccounting Member since: Nov 4, 2005
    #3
  4. David Richards

    David Richards UKBF Contributor Free Member

    Posts: 509 Likes: 157
    Insurance is exempt from VAT in the UK (an "exempt supply"). Which means no VAT is charged on insurance, but also that insurance firms cannot reclaim VAT on the things they buy which relate to an "exempt supply".

    That's correct.

    Presumably they have supplied you with a UK VAT number. (If they don't, you probably should be charging Spanish VAT.)

    If they have a VAT number, it suggests they are "partially exempt". Which means that they can claim VAT on some things, but they can't reclaim VAT on the things they buy which relate to "exempt supplies". So even though you don't charge them any VAT, they will have to pay UK VAT on what they buy from you.

    EC VAT generally works like this. When you (a Spanish company) sell to VAT-registered business in another EC country, you don't charge them VAT. So let's say you sold something to a British company - a company which wasn't involved in insurance. When your customer gets the invoice, they will pay UK VAT on what they bought from and they get to claim it back - all at the same time. It's 'notional' VAT that they just report on their VAT return.

    In this case, your customer is VAT registered - so you don't charge Spanish VAT. But on their next VAT return they will pay UK on what they bought from you - but as it relates to an "exempt supply", they won't be able to claim it back.

    In simple terms, it means that it doesn't really matter where they buy the goods from - they'll still pay UK VAT and they won't be able to claim it back.

    (This is a bit simplified and all from memory - so apologies if I have got anything wrong.)
    Last edited: Jun 11, 2010
    Posted: Jun 11, 2010 By: David Richards Member since: Mar 17, 2010
    #4
  5. David Griffiths

    David Griffiths UKBF Regular Moderator

    Posts: 10,215 Likes: 3,252
    It won't work.

    The insurance company has to implement the reverse charge on the value of imports. In other words charge itself output tax on the supply, and being partially exempt it won't be able to deduct it in full.

    It doesn't even work if the insurance company prints the stationery itself - there are rules to impose the equivalent of a reverse charge in such circumstances
    Posted: Jun 11, 2010 By: David Griffiths Member since: Jun 21, 2008
    #5
  6. europeanprinter

    europeanprinter UKBF Newcomer Free Member

    Posts: 2 Likes: 0
    thanks for all the replies.... this seems to be a great forum and a great resource.
    Posted: Jun 11, 2010 By: europeanprinter Member since: Jun 11, 2010
    #6
  7. lockyer

    lockyer UKBF Regular Full Member - Verified Business

    Posts: 1,184 Likes: 191
    Insurance brokers get hit from this too......its my personal bug bear. feel free to quote me!
    Posted: Jun 16, 2010 By: lockyer Member since: Oct 27, 2008
    #7
  8. David Griffiths

    David Griffiths UKBF Regular Moderator

    Posts: 10,215 Likes: 3,252
    So you are happy not to pay VAT on your commissions


    but

    Don't like paying VAT on stationery?
    Posted: Jun 16, 2010 By: David Griffiths Member since: Jun 21, 2008
    #8