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HMRC internal manual

VAT Insurance

General introduction and the law: legal notes to Group 2: Legal Note 10 - indemnity

  1. Item 4 does not include the supply of any services which -

  2. are supplied in pursuance of a contract of insurance or reinsurance or of any arrangements made in connection with such a contract; and
  3. are so supplied either
(i) instead of the payment of the whole or any part of any indemnity for which the contract provides, or  

(ii) for the purpose, in any other manner, of satisfying any claim under that contract, whether in whole or in part.  

Under some insurance policies, services are supplied to the insured party, rather than a sum of money to indemnify the insured. For example, if a pipe bursts the insured will receive a plumber’s services free of charge rather than a sum of money from the insurer. The insurer will then meet the plumber’s fee. This legal note clarifies that the plumber’s services, or any services provided in similar circumstances, are excluded from the VAT exemption. See also VATINS5610.