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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 (which deals with insurance supplied with goods and services). Guidance on IPT can be found inIPT.

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.