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UK VAT exemption to cost sharing companies in insurance groups

  • VAT
  • 15 March 2013 | Richard Asquith

UK VAT exemption to cost sharing companies in insurance groups

The UK tax authorities have updated their rules to comply with the EU VAT Directive on VAT and exemptions for groups of companies sharing cost saving outsourced services.

The extension of the exemption is targeted at insurance groups.  Insurance, as a financial service, is VAT exempt.  This means that insurers were artificially holding certain back offer administration tasks in-house for fear of being charged non-deductible VAT if outsourced.

New UK VAT exemption for insurers on outsourcing

UK insurance groups will now be able to set-up special outsourcing entities within their groups, to provide services across the group companies without having to charge UK VAT.

To qualify for the exemption, the following hurdles must be passed:

  • the use of the exemption should have no material impact on competition within the market place
  • all members of the group must have greater than 5% VAT exempt activities
  • a new special purpose entity must be incorporated
  • the services provided must be wholly necessary for the other members of the group

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.