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HMRC internal manual

VAT Insurance

HM Revenue & Customs
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Recharging Costs: General


A common problem which you may come across concerns businesses that make charges for insurance in order to recover the cost to them of obtaining their own insurance cover (that is, the premium they have paid to a third party).

Such charges do not represent a supply of insurance to the customer, because the insurance covers the businesses own risks and no insurance cover is passing to the customer. Any charge for “insurance” in these circumstances is simply a part of the consideration charged by the business for its main supply, and follows the same liability.

Businesses may alternatively argue that in recharging the cost of insurance they are acting as insurance intermediaries and claim exemption under item 4. This is mentioned in the example at VATINS2620 below. VATINS5000 covers item 4 services generally.

The insurance documents will nearly always hold the key to establishing the supply position, and consequently the liability position. With any question of determining whether you are dealing with insurance or a “related service”, you will find it particularly beneficial to examine the insurance policy itself together with the certificate and any supporting schedule. This shows precise details of the insurance and to whom cover is afforded.

Your findings from this examination could also be supported by other subsidiary documentation. For example, in matters relating to insurance of rented property, you will also find it useful to examine the lease.