UK Insurance and ‘claims handling’ services – change in the air?

At the moment HMRC accept that business can exempt their supply of ‘claims handling’ services to insurers where they operate under a delegated authority.

This arrangement is fairly unique across the EU and financially beneficial to UK based insurers who would otherwise not be in position to reclaim the associated input VAT. To date HMRC have kept this approach awaiting the EU Commissions wider review of VAT in the financial services sector. This review has now been abandoned and as such HMRC will be under pressure to fall into line with the rest of the EU. Should that happen the impact on recovery rates and the status of existing long term contracts should be understood, at least from a risk perspective. Any announced change is unlikely to have retrospective effect.