What is insurance for the purposes of the exemption?: the regulation of insurance: non-permitted insurers
It is important to remember that anyone providing insurance without the necessary authorisation (a non permitted insurer) is committing an offence under the FSMA and is liable to prosecution.
If you come across a non-permitted insurer claiming to be making supplies of VAT exempt insurance you should take the following action:
- Using the guidance given in this section try to establish whether the supply being made is likely to be viewed as insurance by the FCA.
- If not, rule that the service being supplied is not insurance and (unless it falls into another exemption, such as finance) liable to VAT at the standard rate.
- If you think the service is likely to qualify as insurance, inform the business that it may be acting illegally and advise notifying the FCA immediately.
- Once the business notifies the FCA, delay any further action until the FCA rule on the nature of the supply being made.
- If the FCA rule that the supply is not insurance, take the action in point 2 above.
If the FCA rule the supply is insurance, then:
- agree VAT exemption;
- consider the partial exemption position, if this has not already been done by the business; and
- refer the case to the local Insurance Premium Tax (IPT) officer (LIPTO) for action regarding registration for IPT (assuming the trader isn’t already accounting for IPT).
If the business refuses to notify the FCA but still insists that the supply being made is exempt as insurance (despite the regulatory, partial exemption and IPT implications), please refer the case to Deductions & Financial Services Team.