VAT: Use and enjoyment provisions for certain insurance repair services

VAT: Use and enjoyment provisions for certain insuranc

The UK legislative changes applying use and enjoyment to certain insurance repair services have now been passed

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The UK legislative changes applying use and enjoyment to certain insurance repair services have now been passed. The changes were first announced in Summer Budget 2015 and were aimed at ensuring that UK repair services carried out under a UK insurance contract will be subject to UK VAT. Currently, where services are supplied to a non UK insurer, the default business-to-business place of supply of services rule (where the business customer belongs), means that UK VAT is not due. This is despite the fact that the work will in all likelihood be carried out in the UK and the insured will belong in the UK. This change estimates to save around £5 million per year.

Following consultation, the legislation has now been passed, and published alongside an explanatory memorandum. The new rules come into force with effect from 1 October 2016. The Supreme Court in WHA was clear that under the contract of insurance the insurer undertakes to meet the cost of the repair and that the supply of repair services was to the insured individuals. Such repair services to UK individuals will be subject to UK VAT and not affected by these changes. The majority of insurance arrangements are therefore unaffected. Of more importance and impact will be the further expansion of use and enjoyment to services such as advertising.

For further information please contact :

Neil Smith

Karen Killington 

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