Paying VAT on a non-fault insurance claim

El_Campello

I have recently made a claim on my company van insurance and after having the repairs done I was informed that because I was VAT registered I would need to pay the VAT on the cost of the repairs, even though it was a non-fault claim. The reason being that insurance companies cannot claim back the VAT.

I fully understand that I can claim this back in my VAT returns, however I don't see why I should be out of pocket for something which is not my fault. This seems totally unfair and I question what happens when non VAT registered people have claims.

Seems totally wrong to me.

*~Zephyr~*

I don't see the problem. How are you out of pocket? You give the money to the insurers and then get it back from HMRC through your VAT return.

OK, so you are temporarily without the funds until the next return is due, but it's only temporary.

InsideInsurance

The insurer has to indemnify you and so if you can recover the VAT elsewhere they have no obligation to pay it for you.

Similarly, if you make a loss of earnings claims but had been received additional benefits whilst you were injured the benefits are deducted from the settlement.

El_Campello

Zephyr, I am £500 out of pocket at the minute. Being VAT registered doesnt mean I can afford to pay out £500. Like I said, I am aware that claim it in March, but why should I have to do that?

El_Campello

Another point worth noting is that I have spoken to a few insurance brokers who weren't aware of this. Hence my post.

InsideInsurance

El_Campello wrote: »

Zephyr, I am £500 out of pocket at the minute. Being VAT registered doesnt mean I can afford to pay out £500. Like I said, I am aware that claim it in March, but why should I have to do that?

Unfortunately 4 months in insurance and court timescales is fairly short. Look on here and you will find many who've had to wait 18 months or longer for settlement.

The "problem" is if they did reimburse you the VAT then there is nothing to stop you also claiming the VAT back from HMRC which would be betterment

dacouch

El_Campello wrote: »

Another point worth noting is that I have spoken to a few insurance brokers who weren't aware of this. Hence my post.

The brokers you spoke to must be very inexperienced as it's been the way Insurers have acted for decades.

It typically comes up when a vat registered company or sole trader makes a windscreen claim as they have to pay the VAT to the windscreen company who are typically Autoglass. Asking whether your VAT registered is one of the first things Autoglass would do when handling a windscreen claim.

Quentin

El_Campello wrote: »

Another point worth noting is that I have spoken to a few insurance brokers who weren't aware of this. Hence my post.

All that does is confirm many people's views on the poor standards that are seemingly acceptable to the insurance broker profession!


Now you know why you are asked whether you are VAT registered by insurers.


This is the norm. Next time you aren't to blame after an incident don't use your own policy to claim off if you can't pay the VAT and reclaim it via your next VAT return.

*~Zephyr~*

El_Campello wrote: »

Zephyr, I am £500 out of pocket at the minute. Being VAT registered doesnt mean I can afford to pay out £500. Like I said, I am aware that claim it in March, but why should I have to do that?

I suppose the assumption is that £500 is insignificant to a business turning over £77k + a year, but I agree that it may not always be the case.

£2,500 worth of damage to your van? Ouch! Must have been a nasty accident. I hope the driver is OK.

El_Campello

Cheeky !!!!!!!. Do you know the difference between turnover and profit? My profit was £8,765 last year.

Quentin

El_Campello wrote: »

Cheeky !!!!!!!. Do you know the difference between turnover and profit? My profit was £8,765 last year.

This £500 isn't related to your turnover or your profit! (Assuming its for the VAT you are being asked to pay)