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HMRC internal manual

VAT Retail schemes guidance

Special arrangements for certain professions or trades: Warranty sales

If a retailer sells an insurance product as part of his supply of goods or services, for example an extended warranty with a domestic electrical appliance, then officers must consider the VAT/IPT implications of such supplies. For example:

  • is the warranty underwritten by an authorised insurer or is it merely an in-house guarantee?
  • if the former, does the higher rate of IPT apply?
  • does the retailer receive a commission from the insurance company or charge a fee to the customer (the insured) for arranging supplies of insurance as a third party?
  • are any insurance-related charges disclosed/evidenced?

Officers should consult the guidance in VATINS- VAT Insurance (which deals with insurance supplied with goods and services). Guidance on IPT can be found in IPT- Inurance Premium Tax

Any fee or commission charged by the retailer as in the first bullet point above is consideration for a supply of services and, depending on which scheme is used and whether the recipient of the supply is a taxable person, may need to be accounted for outside the retail scheme.