On 15th March 2016 Peter Hewitt, Head of VAT, presented a session at the AIRMIC Academy in London concerning “VAT on Claims Costs”. The session was facilitated by the AIRMIC Academy Chairman David Gamble, and was attended by risk managers from some of the largest companies and organisations in the country.
The workshop was held the day before the 2016 Budget and two days before the Court of Justice of the European Union released its judgment in the Aspiro SA case. Both the Budget predictions and the likelihood of claims handling becoming VATable were discussed at length.
The Aspiro case shows that the UK and some other Member States are out of step with the rest of Europe in allowing exemption for claims handling. Alternative ways of mitigating the VAT cost of handling claims were considered, in advance of a likely UK law change.
The introduction of a use and enjoyment rule for claims fulfilment costs involving the repair of tangible moveable property was also considered. The extent of this rule is yet to be tested, but the essential message is to ensure that policyholders incur costs if they are able to recover the VAT to be charged. Of course, this means they need to be the recipient of the supply and that often needs to be considered at the inception of the policy itself.
Further information may be obtained from Peter Hewitt at Fiscal Reps:
+44 20 7036 8070