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HMRC internal manual

VAT Insurance

Insurance with other goods and services: insurance sold by intermediaries with other goods or services

Intermediaries may supply their insurance related services alongside other goods or services. For example:

  • a broker may be contracted to design and market an insurance product as well as selling it to potential customers;
  • a broker or agent may provide risk management advice in conjunction with their insurance intermediary services;
  • an electrical retailer may charge their customers a separate fee for arranging MBI insurance to cover the goods they are selling; or
  • a double-glazing contractor may charge their customers a separate fee for arranging insolvency insurance in connection with their double- glazing services.

In all these circumstances, you will need to apply the guidelines in VATINS7130 to determine the supply position and corresponding VAT liability.

It is also important that you remember that the VAT liability will be subject to the disclosure provisions outlined in VATINS5700 to VATINS5750.

Where intermediaries, such as retailers, arrange insurance in connection with their main supply of other goods or services but do not charge a separate fee to the customer for their arrangement services, there will be no supply of insurance related services to the customer - the supply of insurance itself will be made by the insurer and paid for as premium collected by the intermediary. Any supply of related services by the intermediary will be a separate supply made to the insurer (see VATINS5740).

In these circumstances, the customer will be receiving supplies from two different suppliers, insurance from the insurer and goods or services from the intermediary. Whilst we don’t rule it out altogether, it is unlikely that there will be a single supply to the customer that includes insurance.

If you have a single/multiple supply case involving two suppliers please seek advice from the appropriate supply policy team and/or Deductions & Financial Services Team before taking any action.

Mechanical Breakdown insurance (MBI) sold with second hand vehicles

Special rules apply for determining the value attributable to MBI when it is sold with a used vehicle for a single selling price. More information on this can be found in VAT Notice 718: The VAT Margin Scheme and global accounting, and the guidance manual VATMARG08000.