Letting agents recharging insurance and adding VAT

mcplumb

Hi

In previous years I have been offered a Rent guarantee policy by my letting agent, no policy was offered in December 2022. And no policy was charged for, I was happy with this.

Fast forward to December '23 and a deduction of £260 with an additional £52 VAT on top.

Firstly can a letting agent "sell" insurance at a profit making it a VATable supply or would any VAT only be on admin fee element.

Also I'm just annoyed about the automatic deduction of the policy cost with no - Key fact, policy docs etc and would the insurance even be suitable as the tenant has a guarantor.

user1977

Is it actually "insurance" as in a policy provided by a separate insurance company, or effectively just a guarantee by the agency that they'll cover the rent? If the latter then I can see why it would be treated like any other fee by them for VAT purposes.

dunstonh

Firstly can a letting agent "sell" insurance at a profit making it a VATable supply or would any VAT only be on admin fee element.

If its insurance than it would not be VATable but would have IPT.   If its a service the agent offers then its VATable and not subject to IPT.

Also I'm just annoyed about the automatic deduction of the policy cost with no - Key fact, policy docs etc and would the insurance even be suitable as the tenant has a guarantor.

You are free to choose your letting agent and the services offered.

mcplumb

I have emailed them seeking clarification on the details. I believe it is an insurance product via Let Risks

DullGreyGuy

VAT/IPT is a complex subject and insurers hire armies of experts on the matter and they don't even always agree. 

If they are selling you an insurance product then they would have to be authorised by the FCA to do so and you would pay IPT on it. 

As a consultant I often have to travel and things like train tickets are zero rated for VAT however when I charge my client I add on 20% VAT to the ticket. I am not selling them a train ticket, I am selling them the service of me having bought a train ticket. 

Its potentially possible, I'm not one of the said experts, that the agency are providing a service rather than selling you a policy... the service potentially is insurance backed.

The likes of Currys and D&G spend a lot of money ensuring they aren't counted as insurance, similarly if you provide services to an insurer it may be VAT rated or Exempt depending on if you are acting as the insurer (eg handle claims for them with full authority, VAT Exempt, have to refer the case to them then VAT applies)