Andrew Needham looks at the VAT position of insurance claims and what happens when a business cannot recover all its VAT.
When a business suffers a loss and makes an insurance claim, the insurance company will ask if the business is VAT registered. The normal position is that if the business is VAT registered, the insurance company pays net of the VAT. The business then claims the VAT element from HMRC on its next VAT return. If the business is not VAT registered, the insurance company pays the full amount of the claim, including the VAT.
