Over the years it has however been argued by different people if Value Added Tax (VAT) should affect insurance or not; these has led to numerous debates and most scholars has however given reasons as to why it should not be added. Despite these numerous argue, several researches was carried out to ascertain truly if Value Added Tax is added for insurance or not and from the major researches carried out, it should that the answer whether Value Added Tax is included in Insurance or not is situational not basically as a firm decision or foundation.
The question still stands what is the difference between Value Added Tax and Insurance Premium Tax?
Value added tax is a consumption tax placed on a product whenever the value is added at each stage of the supply chain from production to the point of sale or service while Insurance Premium tax is a form of tax that the tax must be added to all general insurance premium within the United Kingdom. In United Kingdom value added Tax is not applicable on insurance instead the government requires you to pay Insurance Premium Tax at its stead except for certain reserved situations.
Value Added Tax and Insurance
Truth be told, VAT is not always exempted when it comes to the concept of insurance. For instance, if the invoice is from the insurance company it will show Insurance Premium Tax which signifies Insurance Premium Tax and it will be exempted from Value Added Tax. However, if there is a case in which the insurance is then recharged to you directly by the policy holder and the policy holder happens to be the one which is registered under Value Added Tax, then the insured must be charged for Value Added Tax; this affects where a block policy is held or if the policy holder does not charge you the exact or concise premium charged to it. The following are the several cases that should be considered;
- Insurance becomes taxable if Removals Company has a block policy on moves but charges you fee for your cover as the insured.
- If the Landlord pays insurance for the entire property as well as places charges on you on the same amount, then it is said to be exempted from paying tax.
- If the landlord pays for the entire properties but charged a particular percentage of proportion for one-unit block then it is taxable.
In conclusion, it is evident to say that you can conclude on that if there is Insurance Premium Tax (IPT) and it is correctly stated on the invoice then the insurance will be exempted from Value Added Tax (VAT).
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