VATINS5705 - Services of insurance intermediary: insurance supplied with other goods and services -legal notes (3)-(5): general
The following paragraphs are important in determining the liability of an intermediarys's services when insurance is sold with taxable (but not zero rated) goods or services.
In many instances where a business sells goods or services, insurance relating to those goods or services is often made available. In these instances the supplier of the goods or services usually arranges the insurance and may be regarded, therefore, as acting as an intermediary in the provision of the insurance.
These services of arranging insurance are exempt from VAT. However, where the insurance is sold with taxable goods or services certain provisions must be met in order to treat the insurance related services as exempt. These are detailed at paragraph VATINS5720.
These provisions also apply where, instead of the retailer selling the insurance with the taxable goods, a person connected with them arranges the insurance and deals directly with the customer. Legal note (6) to Group 2 provides that the definition of connected persons is derived from section 1122 of the Corporation Tax Act 2010: connected persons, a copy of which is reproducted in VATINS9000 at the end of this guidance.
These provisions were introduced in 1997 to help counder value shifting - see VATINS7500.
There are many exampiles of insurance products sold in a package with taxable goods or serviced and they include:
- mechanical breakdown insurance (MBI) sold with cars;
- travel insurance
- insurance agains the breakdown of, or damage to, white or brown goods; or
- property and liability insurance for tenants of a building, complex, etc (where options to tax has been excercised).