Autumn Budget 2018 – VAT anti-avoidance: insurance intermediary services

Suppliers of qualifying insurance services do not charge VAT on their supplies, including those who provide intermediary services between the insurer and the insured.  This is true whether the supplier is established in the UK, elsewhere in the EU or outside the EU.

There are however advantages to such suppliers being established outside the EU.  The supply of advertising by a UK advertiser to a UK insurance intermediary will be subject to a UK VAT charge which cannot be recovered by the UK insurance intermediary.  It becomes part of the intermediary’s costs. Under current rules, this is eliminated if the intermediary is established outside the EU.

With effect from 1 March 2019 legislation will be amended  to restrict input tax recovery to circumstances where the final customer of the insurance service does not belong in the UK.

This will affect those businesses that have established themselves outside the EU and who act as an insurance broker or take part as intermediary in a chain linking a provider of insurer with a party seeking insurance.  The change will only affect those intermediaries and brokers where the party seeking insurance belongs in the UK.