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HMRC internal manual

VAT Insurance

Services of insurance intermediary: Insurance supplied with other goods and services -Legal notes (3)-(5): Identifying an additional fee or commission


Because of the way the industry works, it is not always easy to establish whether the payment for arranging the insurance is part of the premium or an additional amount. The contract of insurance will assist here, and it is also useful to consider the requirements of IPT legislation.

Under IPT legislation, the definition of an insurance premium is given at section 72 ofthe Finance Act 1994. This is relevant because an insurer is expected to account for IPTon the amount of the premium due under the contract of insurance. The amount of the premium includes any commission or fee paid to intermediaries under the contract.

Section 72 specifies that (in most instances) the insurer must account for IPT on any amount charged in connection with an insurance contract, unless it is charged under a separate contract.

This means that, for VAT disclosure purposes, all payments to the intermediary may betreated as insurance premium unless they are charged by the intermediary under a separate contract and not liable to IPT.

There is more information on VAT and IPT in VATINS8000.