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HMRC internal manual

VAT Insurance

Claims handling: Claims handling by experts under Legal Note 9

The services of loss adjusters, average adjusters, motor assessors, surveyors or other experts (such as assessing damage or investigating potential fraud) are normally standard rated for the purposes of VAT. Whilst it is accepted that loss adjusters and other such experts often provide claims handling services alongside their loss assessment services, they are not normally seen as providing those services in an intermediary capacity as the loss adjuster etc usually acts solely on behalf of the insurer (or in some instances, the insured) completely outside the chain of supply of the insurance itself (see VATINS5220).

However, Legal Note 9 to Item 4 (reproduced in VATINS1375) allows the claims handling services of loss adjusters, average adjusters, motor assessors, surveyors or other experts on behalf of the insurer to be treated as exempt where certain conditions are met (see VATINS5540 for details).

There is no statutory definition of other experts for the purposes of Legal Note 9, and many people with particular skills may be seen as an expert in some capacity, however, not all will qualify as experts for the purposes of this note. An expert is an individual or a business whose expertise in a particular area is required by an insurance company to value/assess/examine/adjust a particular type of claim.

So other experts may also include for example the services of medical professionals (see VATINS5405), solicitors, antique specialists and jewellers where the handling of a particular claim requires expertise in these specific areas. Specialist claims handling organisations, where an insurer contracts a supply of claims handling services from a business not because of that business’s expertise in a particular field but because of its expertise in claims handling generally, do not fall within the definition of other experts so they do not need to meet the necessary conditions of Legal Note 9 and, their claims handling services will be exempt as outlined in VATINS5510.

Also, Legal Note 9 does not include “experts” who act on behalf of the insured party or policyholder (such as loss assessors) the exemption only applies when the claim is handled by a person acting as an agent for the insurer or reinsurer.