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HMRC internal manual

VAT Insurance

Recharging Costs: Example 2


A property owner (landlord) rents out commercial buildings. Some of the tenants rent plant and equipment as part of the same lease. The landlord is charged different amounts by an insurer for the different properties depending on the nature of the property, and the level of plant and equipment housed there. The landlord recharges these amounts to the tenants and argues that the charge is exempt. After examining the supporting documents we disagree, for the following reasons:

  • the insurance policy shows only the landlord as the insured;
  • the tenant has no right to claim against the insurance company under the policy;
  • the lease lays the responsibility for insuring the property to the landlord; and
  • there is no insurance of the tenant’s own risk.

It is clear that this is the landlord’s own insurance, and the recharge is part ofthe cost of providing the accommodation and the equipment. The recharge therefore followsthe liability of the main supply.

The landlord cannot be considered to have acted as an intermediary under item 4 because a person cannot arrange for insurance to be supplied to a third party if in fact it is only they who are covered by the insurance.