vat on insurance excess

[lotus21]

As a builder if we carry out work for insurance companies and they collect the cheque for the excess from the policy holder and then forward to us upon receipt of an invoice which they say should include vat. Ive checked with the HMRC and they say this is incorrect and no vat should be included. Has anybody had experience of this before.

Thanks

 

[David Griffiths]

Are you VAT registered?

If you are all of your invoices should include VAT. Sometimes, if the policy holder is VAT registered you have to send them an invoice for the exccess plus all of the VAT. You then invoice the insurance company for the cost of goods less the excess.

As an example, you do work for £5,000 an the excess is £500

Bill the insurance company £4,500

Bill the customer £500 plus £1,000 VAT

 

[lotus21]

the insurance company is charged the vat on the main part of the work but the excess is paid by a private customer and according to hmrc should not include vat? The excess is on avarage 1000.00 and we have been including the vat in this but as said the hmrc say no vat should be included. Complicated.

 

[David Griffiths]

For a private customer, using the same figures

Bill the customer £500.

Bill the insurance company £5500 (That's £5000 plus £1,000 VAT less £500 excess)


You can do this in two ways

Bill the customer £500 VAT inclusive = £416.67 plus VAT
Bill the insurer £5500 VAT inc = =£4,583.33 plus VAT

Or

Bill the customer £500 no vat
Bill the insurer £4500 plus full VAT of £1000

Comes back to the same thing. Sounds like the insurer wants it done the first way

 

[lotus21]

Thanks for reply I just am trying to find out wether an excess would include vat . I dont want to be paying vat if I dont have to, thanks

 

[David Griffiths]

An excess is an arrangement between the insurance company and the policyholder. It doesn't affect you, and everything that you do is subject to VAT in the normal way.