Paying VAT on car hire vehicle after non-fault RTA

nikmondo

Hi ladies and gents,
I've scanned a few posts on here in regards to my problem but my issue is a little different to the other posts that I have come across so, here's my story!

I'm a driving instructor and whilst on a driving lesson a few weeks before last Christmas, my (leased) car rear was rear ended at a roundabout causing some damage. Anyway, the guy who crashed into me admitted fault and he had insurance so everything was being dealt with in the correct way. I have a Driving Instructor type Insurance. 

Now obviously with my car having dual controls I required a dual controlled replacement vehicle in order for me to carry on teaching whilst my car was being repaired to which my insurance company sorted out for me. All was good, the car was delivered to my house, i used the vehicle for a week and then my car was repaired so it was arranged for me to collect my car from the garage and leave my hire vehicle there so it can be picked up. They actually didn't have a driver ready to pick my car up which meant I had the hire vehicle for longer than I needed it.

So anyway, I thought that was the end of it all.....until I received a £520 VAT bill for the hire car! Naturally I'm thinking this couldn't be right if it wasn't my fault in the first place but am I completely wrong? I'm not VAT registered, my car was leased and insured under an instructing insurance policy and with work being so affected by Covid over the last 6 months, dishing out £500 for something which was completely not my fault, scrambles my brain a bit! I was also charged 'extra' VAT for having the vehicle longer due to them not having a driver ready to collect the vehicle but that's another issue.

Any advice would be greatly appreciated guys as it's quite frustrating! 
Best Wishes,
Niki

neilmcl

Contact the insurance company.

AdrianC

Business insurance policy, though...

So, no, no great surprise at all that the insurer presumes you're VAT-reg. It'll be in the Ts & Cs of your policy.

Jumblebumble

AdrianC said:

Business insurance policy, though...

So, no, no great surprise at all that the insurer presumes you're VAT-reg. It'll be in the Ts & Cs of your policy.

Lets be practical
Personally I am not convinced that many self employed Driving Instructors would be registered for VAT and the insurance company should know this
It would make anyone doing so somewhat uncompetitive

Were_Doomed

£500 VAT only bill? So the hire vehicle was charged out at £2,500 + VAT for a week? 👀👀👀

AdrianC

Jumblebumble said:

AdrianC said:

Business insurance policy, though...

So, no, no great surprise at all that the insurer presumes you're VAT-reg. It'll be in the Ts & Cs of your policy.

Lets be practical
Personally I am not convinced that many self employed Driving Instructors would be registered for VAT and the insurance company should know this
It would make anyone doing so somewhat uncompetitive

Any business turning over £85k+ (or 25% of that in any one quarter) has no choice but to register. Sure, the OP is a one-man band, so is unlikely to turn that over. But if the business employed two instructors? Easily.

If the VAT isn't reclaimable, then it's an uninsured loss arising from the claim, so the bill can go straight to the other party's insurer.

Car_54

AdrianC said:

Jumblebumble said:

AdrianC said:

Business insurance policy, though...

So, no, no great surprise at all that the insurer presumes you're VAT-reg. It'll be in the Ts & Cs of your policy.

Lets be practical
Personally I am not convinced that many self employed Driving Instructors would be registered for VAT and the insurance company should know this
It would make anyone doing so somewhat uncompetitive

Any business turning over £85k+ (or 25% of that in any one quarter) has no choice but to register. Sure, the OP is a one-man band, so is unlikely to turn that over. But if the business employed two instructors? Easily.

Driving instructors in the UK, almost without exception, are self-employed, even those working with the big schools like AA and BSM. Pupils pay the schools as agents for the instructors, so no VAT is payable. The schools' own income is from the franchise fees paid by the instructors, and is subject to VAT.

Any instructor forced to to charge VAT would likely price himself out of the market.

Sandtree

Who arranged the hire car for you?

It is normal practice that VAT registered entities have to pay the VAT element of a claim because they can recover it from HMRC (unless they are on the flat rate scheme but thats then their problem and just one of the few downsides of the flat rate scheme). You say you are not VAT registered and so it ordinarily wouldnt fall to you to pay the VAT.

If its your own insurers then take it up with them; if its in their T&Cs then it becomes an uninsured loss claim against the third party insurers. If the third party insurers arranged it then you need to ensure that they are aware that you’re not VAT registered.