Andrew Needham considers when businesses can exempt their insurance commissions and when they are subject to standard-rated VAT.
The provision of insurance is exempt from VAT, so insurance companies do not charge VAT on the sale of insurance. On the downside, because they are making exempt supplies, they are not able to recover the VAT on the associated costs.
However, in addition to the exemption of the insurance itself, insurance brokers and other intermediaries can benefit from the exemption on the commissions they receive, if they fulfil certain criteria.
Intermediary services
Generally speaking, the kind of services covered by the exemption are those traditionally carried out by insurance brokers or agents, such as:
- arranging insurance contracts;
- performing related follow-up services such as amendments to cover;
