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HMRC internal manual

VAT Insurance

HM Revenue & Customs
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Types of insurance: warranties and guarantees: establishing the liability of extended warranties

In general, an extended warranty that is:

  • sold as a separate product;
  • for a separate consideration; and
  • under terms consistent with insurance

will constitute insurance even though it is agreed in the context of a sale.

If the provider is a third party, the extended warranty will almost certainly constitute a supply of insurance. For example, the third party warranty provided by a car dealer along with a car will generally be insurance because there is a separate commitment undertaken by a third party provider who accepts risk and receives a separate premium for it.

If the third party providing such a warranty is not a permitted insurer, as described in VATINS2520, the input tax recovery position and IPT liability may mean that such providers prefer to account for VAT on their supplies than treat them as exempt insurance. However, this could give them an unfair advantage against the providers of insurer-backed warranties and it is important that in all cases you follow the procedure laid out in VATINS2530.