VAT on insurance?

martyn0284

Hi

I work for a well known delivery firm on a self employed basis. We are subject to paying 20% vat on insurance premiums if we lease a vehicle through them.

I can't find anywhere that says we should be getting charged vat, and instead it should just be ipt at a rate of 12%.

Am I right in thinking what they are doing is wrong, or am I in actual fact, incorrect?

Thanks 

Hoenir

IPT is levied by insurance companies at the point of sale. Unavoidable cost. 

Your delivery firm is supplying a service and is not directly passing on the actual cost of the insurance (i.e. a disbursement). Therefore VAT is levied on the charge made . 

martyn0284

So are they right in charging us? 

Hoenir

martyn0284 said:

So are they right in charging us? 

Unfortunately yes. 

martyn0284

Ok, thanks for your help

DullGreyGuy

The sale of financial services is VAT exempt but unlike loans etc the government require insurers to levy Insurance Premium Tax on most classes of business if the risk is located in the UK (some highly mobile risks are exempt too like commercial planes, ships and satellites) and it doesn't cover reinsurance (hence some corporates setup a captive insurer and move the risk outside the company using reinsurance instead). 

As explained above, the delivery company isn't selling you insurance, they are selling you the service of using an insured vehicle and as such it attracts VAT. This is similar to if you get a lease vehicle, VAT is charges on the monthly fees.

If you are self employed/contractor etc you will have similar if you become VAT registered... they require you to go somewhere for a conference/training etc and they'll reimburse your expense. You travel by train so pay vat at 0% on the ticket but when you expense your client you have to charge 20% VAT as you've not sold them a train ticket but the service of you having bought yourself a train ticket. Hence any sensible company will get an employee to buy the tickets for travelling non-employees.