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VAT & Insurance

JanJan Experienced MentorRegistered Posts: 654
Has anybody ever come across this before?

I was sorting through a clients records and came across a sales invoice that had been raised by the previous bookkeeper. It was for the VAT element on insurance that had been recharged to a tenant :huh: Now me being me I thought this was a bit odd, after all insurance is outside the scope for VAT, so queried it with my boss. (Who isn't an accountant). He came back and said that the tenants accountant had picked up the error on the original invoice - VAT should have been charged :confused1:. I rang our clients accountant and they said that VAT would have been charged on the risk assesment part of the policy, so they had provided a Vatable service. OK fair enough - but we've charged VAT on the full amount of the premium + IPT (which is for buildings and loss of rent) so obviously it has been worked incorrectly anyway! VAT on IPT, isn't that taxing a tax? As the invoice hasn't been paid and the VAT hasn't been paid over to HMRC by our client, I've to re-issue the invoice and also add VAT onto the insurance for this year. The tenant is VAT registered so he'll be claiming it back anyway, but it just goes against the grain with me to do something which I don't feel is correct.

Sometimes I wish I didn't ask questions :001_smile:. Any thoughts anyone?


  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Hmmm.. who's name is the policy in?

    Insurance is exempt if you are supplying insurance but presumably it is the premises that are being supplied and not insurance.

    To look at it another way, if rent were charged fully inclusive of insurance (without disclosing the amount) then you would be charging VAT on the full amount.

    Incidentally, did you say that insurance for loss of rent is also being recharged? Bit cheeky!
  • JanJan Experienced Mentor Registered Posts: 654
    Thanks Dean - I was hoping you'd answer! Welcome back by the way.
    To look at it another way, if rent were charged fully inclusive of insurance (without disclosing the amount) then you would be charging VAT on the full amount.

    Makes more sense when I look at it that way, although I did ask if it was because it was being recharged.

    Policy in the name of the the estate. Loss of rent? I know, not even going there with that one :lol: I've just started this job and keep querying things. I did say at inteview that I prefer to understand what I'm doing, not just do it because that's the way it was done before, hope they are not regretting it!
  • K HK H Feels At Home Registered Posts: 81
    VAT & Insurance

    Dear JAN,

    I have come across this before.

    If the lease provides for the landlord to insure the property and pass this insurance onto the tenant and if the landlord has opted to tax the property for vat purposes then the insurance is treated the same as rent and has vat added on to it.

    that is assuming that the property is commercial of course and not a flat then vat would not be due.

    best wishes

    K H
  • JanJan Experienced Mentor Registered Posts: 654
    Yes, the landlord opted to tax, - a pub, so a commercial premises.

    Thanks to you both, all clear now.
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