VAT Query

The MOB said:

A friend of mine runs a company (Ltd). The company was involved in a legal case which I believe was settled. It related to an employee being injured while at work. The insurance company paid out I believe and as far as I know paid the legal costs etc also. However, my friend's company were invoiced for these costs directly on the basis that it (and not the insurance companies involved) could reclaim the the VAT on these invoices.​

My question is this: Can my friend's company correctly reclaim the VAT on these invoices? If yes what are the sections in the VAT Act (and or any regulations and legal cases) that allow this?​

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It might we worthwhile rephrasing because I'm a bit unclear as to the facts. Can possible help with clarification.

Basically, my friend's company was sued by one of it's employees. The insurance company for my friend's company settled the case with the employee. As far as I am aware the Insurers also paid the legal fees of my friend's company. However, the solicitors/barristers issued VAT invoices for the fees (that the insurers paid) to my friend's company in it's name. I don't know if there was a clause in the insurance policy which would have allowed my friend's company to recover the legal costs had it paid them (instead of the insurers paying them). So, no money has left my friend's company but it has VAT invoices for legal fees provided to it which the insurers paid.

Can my friend's company recover the VAT on these invoices through it's VAT return?

AFAIK, it will be part of the insurance contract that any VAT charged by solicitors etc will form part of the excess on your policy. This is because Insurance companies cannot claim back any VAT as insurance is a VAT-exempt activity.

In this instance, the VAT paid by the company will be recoverable in the normal way.

I recall a situation here in work where one of the directors had a car crash. We paid the bill to the garage, the insurance paid us in full and we reclaimed the VAT on behalf of thE insurance company because of their VAT exemption they dont pay any VAT

JJ1982 said:

I recall a situation here in work where one of the directors had a car crash. We paid the bill to the garage, the insurance paid us in full and we reclaimed the VAT on behalf of thE insurance company because of their VAT exemption they dont pay any VAT

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I made an enquiry to Revenue a few years ago on behalf of a client who had received a "net of VAT" car damage payout from their insurers, who in turn had asked my client to claim the VAT element of the repair bill in their VAT return. The Revenue's response was that it is highly illegal to reclaim VAT on repairs to a private motor car.

ubiquitous said:

I made an enquiry to Revenue a few years ago on behalf of a client who had received a "net of VAT" car damage payout from their insurers, who in turn had asked my client to claim the VAT element of the repair bill in their VAT return. The Revenue's response was that it is highly illegal to reclaim VAT on repairs to a private motor car.

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I had a VAT registered sole trader client who had crash in his van, again insurance paid net of vat, we put through the VAT element in the VAT returns.

In another case with the same client where vehicle involved was the clients private car the insurance again wanted to pay "net of VAT" as client was registered for VAT. I had great difficulty in explaining to them that while he was registered for VAT he was not entitled to claim the VAT on this item as it was his private car and the claim should be paid gross. In the end after a letter from me explaining that he was not entitled to claim the VAT they paid gross.

VAT always terrifies me, and after a two week hibernation, my brain has turned to mush. I've read through this thread twice, trying to find a solution for my query, but am still befuddled. In examples above, money being received appears to give rise to a claim for Vat refund?

Vat registered limited company, van ( was on operating lease) written off. The insurance will payout, but has requested us to say whether the payout should be vat inclusive or not. If the compensation is received with vat included, does this have to be returned to Revenue?
How would any Vat reclaim arise?
In words of as few syllables as possible!

VAT legislation specifically provides that

where a person is indemnified by an insurer for any fees paid to a barrister or solicitor, the legal services are deemed to be provided to the person and not the company.

This is why your friends company got the invoice.
They can reclaim if they normally have VAT deductibility

John Conlon

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