Claims handling: Exceeding the limits of the delegated authority given to experts
During the period when a loss adjuster or similar expert is working under a delegated authority, and meets the conditions outlined in VATINS5540, exemption will clearly apply. If during the progress of a claim, however, it emerges that the conditions of the authority have been exceeded, for example if the claim falls outside the monetary limit set, and has to be referred back (verbally or in writing including by e-mail) to the insurance company, if the insurance company does nothing more than agree to an extension of the monetary limit (thereby providing the expert with an extension of their authority), the services will continue to fall under the (newly defined) delegated authority and continue to be exempt. The agreement by the insurance company to the extension of the monetary limit must be made in writing, including by e-mail. If the intervention of the insurance company is such that in effect the insurer takes back responsibility for the handling of the claim, then the claim is no longer being handled under the delegated authority and the services of the expert will be standard rated.
In such instances, interim invoices may have been issued and payments made which were treated as exempt from VAT because at that stage the services of the expert fell within the terms of the delegated authority. In effect, a different contractual position exists between the parties after the terms of the delegated authority have been breached and, in VAT terms, two separate supplies of services have been made; one of exempt services under the delegated authority and the second of taxable services after the authority has been breached. There is, therefore, no requirement to go back and revisit the tax treatment applied to the earlier interim invoices, but VAT must be applied to going forwards.