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Partial VAT exemption guidance for insurance industry

  • VAT
  • 13 April 2011 | Richard Asquith

Partial VAT exemption guidance for insurance industry

The UK's tax authority, HMRC, and the Association of British Insurers have issued joint guidance on the rules for the application of partial VAT exemption for insurers and brokers.

Financial services, which includes insurance, is generally exempt from VAT - meaning VAT is not charged on the service. However, UK VAT incurred in the provision of the service ('input VAT') is suffered as a cost to the provider and cannot be claimed back. However, since many insurance industry participants also provide taxable supplies, which do incur VAT, there is special provision for the allocation and recovery of the input VAT.

The briefing provides an outline of the rules for applying for partial VAT exemption. It covers the following issues:

  • The broad rules for partial exemption on the insurance industry
  • Allocation of input VAT between taxable supplies vs exempt supplies
  • Pro rata VAT calculations

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.