VAT on buildings insurance settlement

tbm72

Apologies if this is a stupid question but this is the first time I've ever had to make an insurance claim!

We recently suffered water damage from a leaking tap in our kitchen which has meant the whole floor and part of our kitchen base units have been damaged. Insurance company have accepted liability and have actually been more helpful and prompt in settling than I imagined!

They're only going to settle on a like-for-like basis (which I appreciate is just how it is in insurance claims) so I was asked to get a quote for replacing some kitchen base units in the closest style I could find. I got a quote from a local kitchen company which the insurers have subsequently agreed to pay (where the quoted cost for the units included VAT). The insurers settled quite quickly but minus the VAT element.

Now I understand why as obviously no VAT has been paid at this stage, but I don't really want to go ahead and buy these actual base units as they won't match the existing undamaged wall units. I appreciate they're not going to care about that so I'm going to have to foot most of the cost of fitting a whole new kitchen.

But if I go ahead and buy a whole new kitchen (I think it's called 'betterment'?) can I get them to pay the equivalent VAT element of what they would have been liable for had I just bought the closest match to the damaged units? Or am I being stupid and insurance companies just don't pay the VAT element in a settlement like this?

Quentin

Normally once you provide a receipt they will reimburse you for your vat.

But get this clarified by the insurer (you mention they have "settled" with you rather than given an interim payment,)

Also see what they intend to do about the problem of the new units not matching the rest of the kitchen. Normally a contribution is paid towards replacement of the non damaged but not matching items

tbm72

Sorry, I think it's just an interim payment rather than a final settlement as they've said I can send over more details that they'll consider if further damage comes to light (the floor only came up yesterday, now it has to be dried and a new floor laid before we start on actually replacing the kitchen units). But they've made a few initial payments as I sent over separate initial quotes for parts and labour, just not including any parts of the VAT element.

And they have said they're only liable for damaged items on a like-for-like basis when I mentioned the fact that it's not possible to get exactly matching units. I was told I should be able to remove the door panels as it's only the internal base units that are damaged and just put them on matching cabinets but I can't find anywhere that matches the damaged dimensions exactly.

So if I provide a final receipt when we do actually buy and fit a new kitchen, they might technically be liable for paying a pro-rata VAT settlement for the VAT they would have paid on like-for-like units? I know I need to discuss it with them directly but just trying to get a feel for what is normal in this kind of situation!

(insurer is AXA via BVS managing the claim by the way)

Thank you

dacouch

As Quentin has mentioned, the Ombudsman will normally require the Insurer to pay 50% of the replacement costs of the non damaged matching items.

They don't tend to agree to this unless you bring it up, just mention the Ombudsman and 50% contribution and they should play ball

tbm72

Thank you, that's very interesting to know! I'll tread lightly for now and mention it to them once we've had a proper look at some reasonable replacements!

One last question then - so far I've only been dealing with the middleman managing the claim (BVS) who has actually been friendly and pretty helpful. Do you think I would be better contacting AXA directly and mentioning the Ombudsman/50% replacement cost?

Quentin

No harm discussing with either/both

tbm72

Just to update, AXA have agreed to pay half towards the undamaged units as it's a matching set. Didn't even have to push too hard for it, they accepted my request without fuss! Hopefully they'll also pay the VAT when all the work has finally been done.

Many thanks for the advice all

thrifty_pete

The issue with the VAT is a bit strange. Presumably insurers have to pay VAT on their "inputs" as their "outputs" (policy premiums) are not VATable?
This makes me think of another topic - Insurance Premium Tax is steadily rising to the level of VAT - it doesn't seem fair you have to pay a tax on insuring something. Its not like you could insure up to the hilt and then make claims ever time you needed to replace something?
Maybe just a good stealth tax to raise?