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HMRC internal manual

VAT Insurance

HM Revenue & Customs
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Insurance with other goods and services: double taxation

You may come across instances where insured parties, insurers or businesses selling insurance complain that their supplies are liable to both VAT and IPT. This is particularly likely to occur where insurance is treated as an ancillary part of a VATABLE supply of goods or services, although it could occur in any instance where insurance is a cost component of another supply.

In these instances you should point out that VAT and IPT are two separate taxes with separate legislative bases and are not mutually exclusive. IPT is due from the insurer (although the cost is normally passed on to the insured party) and VAT is paid by the business making the VATABLE supply of goods or services.

However, as a matter of policy, we would seek to avoid instances of any of the parties involved in the supply of insurance (insured, insurer or intermediary) bearing the burden of both taxes. If you come across cases where ‘double taxation’ is an issue (particularly where higher rate IPT is involved) please discuss them with the Deductions & Financial Services Team before taking any action.