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HMRC internal manual

VAT Insurance

General introduction and the law: legal notes to Group 2: Legal Note 3 - insurance sold with standard-rated goods and services

  1. Where -

  2. a person (the “supplier”) makes a supply of goods or services to another (the “customer”),
  3. the supply of the goods or services is a taxable supply and is not a zero-rated supply,
  4. a transaction under which insurance is to be or may be arranged for the customer is entered into in connection with the supply of the goods or services,
  5. a supply of services which are related (whether or not a contract of insurance is finally concluded) to the provision of insurance in pursuance of that transaction is made by -
(i) the person by whom the supply of goods or services is made, or  

(ii) a person who is connected with that person and, in connection with the provision of that insurance, deals directly with the customer, and  
  1. the related services do not consist in the handling of claims under the contract for that insurance,

those related services do not fall within item 4 unless the relevant requirements are fulfilled.

This note applies only in situations where insurance is sold with VAT standard-rated goods or services. Where a supply of goods or services is at the zero rate of VAT or exempt from VAT, this note does not apply.

If the insurance is arranged in connection with the supply of such goods or services and it is arranged by the supplier (or a person connected to the supplier) then it will not be an exempt supply of arranging insurance unless the relevant requirements outlined below are met. These conditions do not apply to supplies of claims handling services. VATINS5700 refers.