# Can insurance companies legally deduct vat from claims?



## MacC

I recently claimed against my insurance company for damage to my car, the insurance company agreed that the reapirs were €3,500.00 but when i went to claim they deducted the VAT because I did not produce a VAT invoice for the repairs. Insurance companies are not registered for VAT so the VAT section of the bill should not matter to them, are they legally allowed to do this? 
I asked the Revenue Commissioners and they say they have no legislation to cover this, I asked the insurance regulator but they just agree with everything the insurance companies do, I checked out my policy and it does not say anythnig about them deducting vat from claims if VAT invoice is not produced, anybody else getting the run around form insurance companies on this?


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## MichaelBurke

Are you registered for VAT, if so you can reclaim the VAT element so normal practice to not pay this element of the claim. Why would they pay it if you can claim it elsewhere, and you won't be out of pocket.

If not simply just ask the garage for a bill showing VAT.

Either way you shouldn't be out of pocket if you do things right.


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## mathepac

It sounds like you produced an invoice for one amount of money but want the insurance company to pay you a higher amount. They won't do that.

I suppose you have an invoice for what you actually paid...


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## MacC

I am not registered for VAT and can not claim the VAT back, the garage will not give me a VAT invoice unless I get the car repaired, I wanted to leave the car with the damage and use the money in addition to the car as a trade in. The insurance company tell me it is "company policy" to deduct the vat if a vat invoice is not produced. I told them that their asessor agreed/approved a figure of €3,500.00 - but they then deducted the VAT, this can not be legal???


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## MacC

Did not produce any invoice, I got a quote for frepairs, they agreed the figure but when i tried to claim the agreed amount they deducted the VAT.


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## Jimbobp

Why not get the car repaired, get the vat invoice & claim the vat back? Once the car is repaired you can then trade it in for your new car. Remember, the insurance company work on an indemnity principal, which means they will reinsate you to the position you were in before the accident, which means a repair of the car - if you decide to do a deal with the garage thereafter than thats your own choice.


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## MacC

I get a better offer when trading my car in with the accident damage, I can use the cash as part payment to buy a new car. The insurance company are not giving me that optoin, they tell me if it is not repaired they will not pay the VAT even though they agreed the amount including VAT, not in my terms and conditions on my policy (or anybody's policy). Sharp practice on their part!


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## mathepac

So I was right, apart from the word "invoice". My post could have read _"It sounds like you produced a document for one amount of money but want the insurance company to pay you a higher amount"

_And I repeat 





mathepac said:


> ... They won't do that ...



Could I suggest you change the title of the thread as the insurance company haven't yet been presented with a VAT-inclusive claim from which to deduct VAT.


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## MacC

Why do you want me to change the title????
I never presented them with an invoice, they assesed the damage and agreed a figure inclusive of VAT of €3,500.00 including VAT - I said OK, give me the money, they asked me to produce an invoice, I said I wanted to trade the car in with the damage and use the €3,500.00 in part payment for a new car, they deduct the VAT. 
Everybody works off an estimate prior to damage being repaired - or not repaired as in my case.


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## Setanta12

VAT companies are exempt from VAT, meaning they suffer VAT but cannot charge it or claim for VAT incurred.

You'r thinking of zero-rated companies, who charge VAT at 0% but can claim for VAT on expenses incurred by them.


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## MacC

I am not registered for VAT. Therefore the insurance company has no right to deduct VAT - or so I thought. I am not thinking of zero rated companies, this actually happened to me, they will not give me the VAT on my claim.


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## Gunship

Your insurance company will not pay out VAT where no VAT has been incurred by you.  Why do you expect the VAT when no repairs have been undertaken and no vat had been incurred, think about it!!


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## MacC

Your argument is that I did not get the car repaired so I am not entitled to the VAT, if I follow this line of thought then I am not entitled to any money because I did not get the car repaired. 
*I am entitled to all or I am entitled to nothing*, this is just a cheap nasty trick by insurance companies to avoid paying VAT.
A few years ago I was hit by another car, I put in a claim using the estimate from my garage for repairs, the third party insurance company paid in full on the estimate. This time becaue I claimed off my own policy they deducted the VAT and said there is nothing I can do about it. One rule for claims off your own policy and another for claiming from a third party - is it legal?


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## Jimbobp

MacC said:


> I get a better offer when trading my car in with the accident damage, I can use the cash as part payment to buy a new car. The insurance company are not giving me that optoin, they tell me if it is not repaired they will not pay the VAT even though they agreed the amount including VAT, not in my terms and conditions on my policy (or anybody's policy). Sharp practice on their part!



Take my advice. You will get nowhere with this. The company are only entitled to reinstate you to the place you were before the accident, not aid you in getting a better deal for a new car. No one will uphold a complaint against them because in essence they are right. Get the repairs done and renegotiate with the car dealer you are buying from.


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## Ed054

MacC said:


> Your argument is that I did not get the car repaired so I am not entitled to the VAT, if I follow this line of thought then I am not entitled to any money because I did not get the car repaired.
> *I am entitled to all or I am entitled to nothing*, this is just a cheap nasty trick by insurance companies to avoid paying VAT.
> A few years ago I was hit by another car, I put in a claim using the estimate from my garage for repairs, the third party insurance company paid in full on the estimate. This time becaue I claimed off my own policy they deducted the VAT and said there is nothing I can do about it. One rule for claims off your own policy and another for claiming from a third party - is it legal?


 


You are entitled to the cost of repairs including VAT as that is what the garage will bill you for.
If you do not repair the car you will get the cost of repairs excluding VAT

If you are not getting the car repaired why should the insurers pay you the VAT?
Are you planning to pay it directly to the Revenue?
If you really feel that hard done by lodge a complaint with the Financial Services Ombudsman.

I fight insurers all the time but I cannot say that they are in anyway wrong in this case.


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## MacC

They should pay the VAT becaue it is part of the cost of repairing the car, *it is not up to them to decide if I get the car reapired or not*, they agreed the value of the damage (including VAT) so they pay that amount, this is nothing to do with the revenue (I phoned them and asked them).


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## callybags

If you think about it logically, MacC, you are saying that the cost of the repairs would be €3,500 including VAT.

The garage are allowing you the cost of the repairs, plus your damaged car against a new car.

The value of the repairs to the garage, were they to carry them out would be €3,500 LESS the VAT of, say €500.

Therefore they are only allowing you €3,000 against the new car.

This is the amount the insurance company will pay you.

Therefore you are no better, or no worse off whether you get the repairs done or not.


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## MacC

Not exactly right Callybags, another garage will take my damaged car at €16,000.00 or repaired car at €18,500.00 (they will not repair it for me for €2,500.00). So if my insurance company gives me the agreed amount of €3,500.00 then I am €1,000.00 better off (or exactly where I should be) on the deal. 
Anyhow, the debate is why do they give you the full amount if you claim against another persons policy but deduct the vat if you claim on your own policy (assuming you claim against an estimate in both cases)?
Seems to me they can stick it to you if you are claiming on your own policy but if oyu claim against another persons policy they are legally obliged to settle for the full amount (including VAT).


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## Ed054

MacC said:


> They should pay the VAT becaue it is part of the cost of repairing the car, *it is not up to them to decide if I get the car reapired or not*, they agreed the value of the damage (including VAT) so they pay that amount, this is nothing to do with the revenue (I phoned them and asked them).


 

You are correct it is not up to them to decide if you get the car repaired or not.
However VAT is payable if a VAT registered business or person carries out a service.
As you are not VAT registered why should it be paid by you.

It would appear to me that you feel that you should profit from this claim.

I would point out that the purpose of insurance is to put you in the position that you were in prior to your loss and it would appear that your insurers have done that.

On another point I refer to your comment that smacks of Libel when you state that the "Insurance Regulator agrees with everything that the insurance companies do" have you anything to back up this comment?

My experience of this organisation is very different then yours and I would suggest that sweeping comments like yours are unhelpful at best.


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## MacC

ED054 
Couple of thngs to point out…..
You say “_As you are not VAT registered why should it be paid by you_.” I have to pay VAT, no way of avoiding this – legal requirement.

I don’t feel that I should profit from this deal, I never said this or gave the impression that I wanted to profit from this, all I want is the amount the insurance company assessor agreed.

To put me in a position prior to where I was before the accident the assessor offered me a figure of €3,500.00 - he now wants to deduct the VAT – this leaves me with a shortfall of about €500.00

When speaking with the insurance regulator the person I spoke to constantly referred to the insurance company and the regulator as “we” and I was referred to as the third party, I suppose this is what you get when the insurance regulator is funded by the insurance companies. If the insurance regulator is even 50% better than the financial regulator then we may as well all give up dealing with them, we all know how lax the financial regulator was with the banks and did nothing to stop the rot and corruption there, I wonder is the insurance regulator any better? (just a question, not libelous in any way J). 

Let me present my argument another way…..

My car is stolen and written off, the assessor agrees a figure of €20k with me, I say great send me the cheque and by the way, I am not buying another car I have decided to cycle to work in future, do they deduct the VAT from my payment?
My freezer fails when I am on holidays, in it there is €500.00 worth of steak, I decide to replace the steak with pork chops worth €200.00 – do they deduct the VAT on the €300.00 difference?
My Rolex watch is stolen, worth €3k I put in a claim but decide not to buy a new watch with the money, do they deduct the VAT?
I put these three questions to the insurance company and in each case the answer was NO, we will not deduct the VAT in these cases.
I asked them why the repair was different and their answer was “it’s company policy”. This is not an acceptable answer, there must be a fuller explanation as to why they treat accident damage differently to any other claim.


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## Ed054

MacC said:


> ED054
> Couple of thngs to point out…..
> You say “_As you are not VAT registered why should it be paid by you_.” I have to pay VAT, no way of avoiding this – legal requirement.
> 
> I don’t feel that I should profit from this deal, I never said this or gave the impression that I wanted to profit from this, all I want is the amount the insurance company assessor agreed.
> 
> To put me in a position prior to where I was before the accident the assessor offered me a figure of €3,500.00 - he now wants to deduct the VAT – this leaves me with a shortfall of about €500.00
> 
> When speaking with the insurance regulator the person I spoke to constantly referred to the insurance company and the regulator as “we” and I was referred to as the third party, I suppose this is what you get when the insurance regulator is funded by the insurance companies. If the insurance regulator is even 50% better than the financial regulator then we may as well all give up dealing with them, we all know how lax the financial regulator was with the banks and did nothing to stop the rot and corruption there, I wonder is the insurance regulator any better? (just a question, not libelous in any way J).
> 
> Let me present my argument another way…..
> 
> My car is stolen and written off, the assessor agrees a figure of €20k with me, I say great send me the cheque and by the way, I am not buying another car I have decided to cycle to work in future, do they deduct the VAT from my payment?
> My freezer fails when I am on holidays, in it there is €500.00 worth of steak, I decide to replace the steak with pork chops worth €200.00 – do they deduct the VAT on the €300.00 difference?
> My Rolex watch is stolen, worth €3k I put in a claim but decide not to buy a new watch with the money, do they deduct the VAT?
> I put these three questions to the insurance company and in each case the answer was NO, we will not deduct the VAT in these cases.
> I asked them why the repair was different and their answer was “it’s company policy”. This is not an acceptable answer, there must be a fuller explanation as to why they treat accident damage differently to any other claim.


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## Ed054

MacC said:


> ED054
> Couple of thngs to point out…..
> You say “_As you are not VAT registered why should it be paid by you_.” I have to pay VAT, no way of avoiding this – legal requirement.
> 
> I don’t feel that I should profit from this deal, I never said this or gave the impression that I wanted to profit from this, all I want is the amount the insurance company assessor agreed.
> 
> To put me in a position prior to where I was before the accident the assessor offered me a figure of €3,500.00 - he now wants to deduct the VAT – this leaves me with a shortfall of about €500.00
> 
> When speaking with the insurance regulator the person I spoke to constantly referred to the insurance company and the regulator as “we” and I was referred to as the third party, I suppose this is what you get when the insurance regulator is funded by the insurance companies. If the insurance regulator is even 50% better than the financial regulator then we may as well all give up dealing with them, we all know how lax the financial regulator was with the banks and did nothing to stop the rot and corruption there, I wonder is the insurance regulator any better? (just a question, not libelous in any way J).
> 
> Let me present my argument another way…..
> 
> My car is stolen and written off, the assessor agrees a figure of €20k with me, I say great send me the cheque and by the way, I am not buying another car I have decided to cycle to work in future, do they deduct the VAT from my payment?
> My freezer fails when I am on holidays, in it there is €500.00 worth of steak, I decide to replace the steak with pork chops worth €200.00 – do they deduct the VAT on the €300.00 difference?
> My Rolex watch is stolen, worth €3k I put in a claim but decide not to buy a new watch with the money, do they deduct the VAT?
> I put these three questions to the insurance company and in each case the answer was NO, we will not deduct the VAT in these cases.
> I asked them why the repair was different and their answer was “it’s company policy”. This is not an acceptable answer, there must be a fuller explanation as to why they treat accident damage differently to any other claim.


 

Ok I will ignore your comments regarding the financial regulator but as I previously advised if you feel that you are being that badly treated you should lodge a complaint with the Financial Services Ombudsman.

To answer you’re other questions
If your car is written off their is no VAT aspect to deduct because VAT was paid for on the car when purchased originally.

Food is zero rated so therefore your comment is not relevant however if you decide to replace the filet steak with pork chops that is your own decision your insurer will paid for the cost of the goods damaged and if you decide to buy a cheaper replacement that is your decision.

I hope that you will mind your Rolex but if you do lose it the same situation as described above will apply


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## MacC

Just got a letter in the door, the insurance company have waived the policy excess if I leave the VAT element alone (and dont stir thing up I presume), leaves me about level. 
They really dont want me to open a can of worms on this subject.


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## Ed054

MacC said:


> Just got a letter in the door, the insurance company have waived the policy excess if I leave the VAT element alone (and dont stir thing up I presume), leaves me about level.
> They really dont want me to open a can of worms on this subject.


 

Good.
Hopefully that is the end of this matter


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## LS400

MacC
I think you have a very valid point. If your insurance agreed €3500 is the required amount  to reinstate you car to previous condition.. surley its your decision you repair the car or trade it in.
If you take payment less the vat and then decide to repair the car at a late stage, will the insurance issue you another cheque for the vat???


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## MacC

LS400
They have agreed to waive the excess on policy so this leaves me level. 
They REALLY dont want me bringing this to the small claims court, too many arguments in my favor and no legislation that allows them to do this.


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## Willowchase

The company are making a goodwill gesture to you in order to get you off their backs. Be grateful.

Original estimate for the damage is on the basis of what it would cost to repair the car. Naturally this would have to include the vat charge if you are not registered for vat. 

As Ed054 explained, the vat is only payable if you avail of the repair facility. If you decide not to repair the car the Government tax (vat) does not arise and you cannot be charged for it. Therefore the insurance company cannot pay a non existent tax. That's why it's company policy.

This is the point you refuse to accept.

I'm afraid the small claims court would not sustain a claim for a refund of tax that was never paid.


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## MacC

One of the points that is being missed by everybody is that if I make a claim against another persons policy they pay in full on the estimate (including VAT), if I make a claim against my own policy they deduct ther VAT. Their reasoning seems to be that if I am making a claim against another persons policy they have to pay out in full even if I dont get my car repaired, they are legally bound to pay the claim in full.
Why not treat me the same even if I am claiming off my own policy?
I have accepted their offer of not deducting the policy excess even though I think they offered this will make me go away.
I would still like legal clarification on this, I dont think they have a legal right to do this.


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## Ed054

Well seeing that you have dismissed any of the points raised by any of the contributors why don't you go and ask your solicitor.


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## MacC

Too expensive, they say they will look for about €1,000.00 to progress this.......not worth takikng a chance on.


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## Willowchase

The difference is you have a contract of indemnity with your own insurer but not with a third party insurer. Indemnity means putting you in the same position after the incident as you were before, which is what they did.


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## Complainer

MacC said:


> Too expensive, they say they will look for about €1,000.00 to progress this.......not worth takikng a chance on.


Does this figure include VAT?


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## Ed054

Complainer said:


> Does this figure include VAT?


 

You might have to lodge a complaint if it does.


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## peteb

MacC said:


> One of the points that is being missed by everybody is that if I make a claim against another persons policy they pay in full on the estimate (including VAT), if I make a claim against my own policy they deduct ther VAT. Their reasoning seems to be that if I am making a claim against another persons policy they have to pay out in full even if I dont get my car repaired, they are legally bound to pay the claim in full.
> quote]
> 
> Even if you make a claim against someone elses insurance policy, the company involved is still going to look for an invoice/final account for the work done!  There is a difference between claiming for repairs and cash-in-lieu of repairs!


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