VAT on insurance claim

S

Skinszo

Registered User
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Hi there everyone,

First time post so thank you in advance for help and advice.

I have a small building company and we are not VAT registered.

I recently started a small job and found a leak which turned into a large insurance claim.

I was asked to quote for the works and the client also obtained 2 other quotes.

They agreed to go with me but today I have been told that they are deducting VAT.
I priced the job as I always would, my materials and my labour costs and now they have come back and said they are not paying the vat??!?

Do you have any advice as this is now looking like it will leave me out of pocket.

Many thanks
 
Are you charging VAT without being registered for VAT ?

(It may become relevant further on in the thread but if the claimant is VAT-registered then the insurer will only pay for the cost/damages net-of-Vat. The compensation is designed to reimburse the damaged-property-owner for his net cost. When he contracts with someone to repair the goods, the repairer will naturally add on VAT (usually), however this is refundable to the damaged-property-owner in his VAT return. All designed to return him to his original state.
 
If you are not charging them VAT they are not paying you VAT so how are you out of pocket.

If this is a commercial property the insurance company will not pay the VAT as the claimant can recover the VAT.

If its a private home then there seems to be some confusion.
 
Hi
Thanks for replies.

It's a residential property.
I submitted my quote for works (approx £18k)
I don't claim VAT back for anything I buy as I'm not vat registered.
So when I calculate my costs for materials it is based upon what I would pay for them.

But now the insurance company have come back and said there not going to pay the VAT and saying they going to deduct £5k?!?
 
Skinszo said:
Hi
Thanks for replies.

It's a residential property.
I submitted my quote for works (approx £18k)
I don't claim VAT back for anything I buy as I'm not vat registered.
So when I calculate my costs for materials it is based upon what I would pay for them.

But now the insurance company have come back and said there not going to pay the VAT and saying they going to deduct £5k?!?
Click to expand...

I suppose I can kind of see their point. You bought from a VAT registered supplier who withheld VAT. Then you are effectively "selling" to the insurance company who is also VAT registered but now they can't reclaim the VAT as they normally would because you are not VAT registered so they are out of pocket.

Two solutions I can think of: a) tell insurance company to buy supplies themselves directly (unlikely I presume). b) register yourself for VAT.

Of course the labour doesn't have any VAT component so you can just tell them the VAT is zero on the labour so no problem to withhold there.
 
selfassessed said:
I suppose I can kind of see their point. You bought from a VAT registered supplier who withheld VAT. Then you are effectively "selling" to the insurance company who is also VAT registered but now they can't reclaim the VAT as they normally would because you are not VAT registered so they are out of pocket.

Two solutions I can think of: a) tell insurance company to buy supplies themselves directly (unlikely I presume). b) register yourself for VAT.

Of course the labour doesn't have any VAT component so you can just tell them the VAT is zero on the labour so no problem to withhold there.
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This is all wrong.
-Why would you assume an insurance company, in the business of supplying vat-exempt services, registered for VAT?

-Why would a seller withhold VAT? Who is paying who?
 
Kildavin said:
This is all wrong.
-Why would you assume an insurance company, in the business of supplying vat-exempt services, registered for VAT?
Click to expand...

I just can't think of any other reason for them to refuse to pay the VAT component. Is there another reason?

Kildavin said:
-Why would a seller withhold VAT? Who is paying who?
Click to expand...

I mean charge VAT. A VAT registered seller sells goods inclusive of VAT. A VAT registered buyer can reclaim the VAT. But in this case the buyer is not VAT registered so can't reclaim the VAT paid on the purchase.
 
selfassessed said:
I just can't think of any other reason for them to refuse to pay the VAT component. Is there another reason?
Click to expand...

Actually, if the insurance company has a VAT exemption then a VAT registered seller can sell them goods exclusive of VAT. Maybe that's why?
 
You need to tell the insurance company that you are not registered for VAT. Maybe a letter from your accountant or Revenue will suffice. The insurance company should then pay you the full quoted price.
 
+1 with DB74

I think a letter from your accountant/auditor should do it. And would be quicker too.
 
Surely its the VAT status of the claimant which dictates whether the insurance company pays the claimant the VAT or not.

The supplier gives the claimant the invoice and should get paid including VAT (if registered) by the claimant, the claimant then either recovers the VAT from the insurance company or the Collector General.

I think the claimant is confused.

The OP has one invoice for 17k and is not VAT registered, seems odd to me. It's Irish VAT right?
 
Hi Joe
I think in this case, the leak was to the builder's own property and he submitted a claim based upon potential costs to him for getting necessary repair materials - these were for EUR12k net + EUR5k Vat = EUR17k.

Insurance company assumes he's VAT registered - he confirms he's not in this thread - and seek to only pay him the Net. Ie he would be at a loss and would find it difficult from his first VAT3 to seek a refund ? Added to which he would have to charge VAT from now on ?
 
Kildavin said:
Hi Joe
I think in this case, the leak was to the builder's own property and he submitted a claim based upon potential costs to him for getting necessary repair materials - these were for EUR12k net + EUR5k Vat = EUR17k.

Insurance company assumes he's VAT registered - he confirms he's not in this thread - and seek to only pay him the Net. Ie he would be at a loss and would find it difficult from his first VAT3 to seek a refund ? Added to which he would have to charge VAT from now on ?
Click to expand...

People who regularly deal with VAT exempt companies are frequently in a refund situation. Revenue have no issue with this and they do issue a refund.

Charging VAT from now on is only an issue if most of his clients are not VAT registered but the threshold for VAT on services is low (less than the industry average wage AFAIK) so he will hit it soon or later anyway if his business is viable.
 
Skinszo said:
I have a small building company and we are not VAT registered.

I recently started a small job and found a leak which turned into a large insurance claim.

I was asked to quote for the works and the client also obtained 2 other quotes.
Click to expand...

My bad, I thought the the OP was quoting for work for someone else.

Not sure what the reference to 13B has to do with the discussion.
 
selfassessed said:
Wrong because? VAT exempt companies should pay VAT anyway? Really?
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Insurance companies and Banks pay VAT all the time. I hope I'm right in this or my time working on the VAT payments in one such organisation was ... .... em, lets not go there !!! ;-)
 
@Joe_90
Hmmm ... revisiting this again.
13b is not applicable here.
I will admit there is some confusion my side re this having read your last post and preceding posts. Certainly if it is a homeowner with damage submitting quotes, his quotes will be all-in ie Gross of VAT and that is what the insurance company pays out. However if an insurance company receives a claim from a VAT-registered business* it will pay out Net of Vat ... reasoning being that the company receiving the Net will pay that to the Builder adding on an amount for the VAT chargeable by the builder/repairer but can then claim back that VAT in its next VAT return.

In each scenario the amount payable by the insurer differs, but the person suffering the damage and paying for the repairs, is returned to their status before the damage occurred.


*you'd be surprised how lax some insurers are in establishing the VAT -status of claimants.
 
Kildavin said:
However if an insurance company receives a claim from a VAT-registered business* it will pay out Net of Vat ... reasoning being that the company receiving the Net will pay that to the Builder adding on an amount for the VAT chargeable by the builder/repairer but can then claim back that VAT in its next VAT return.
Click to expand...

Thank you for that informative explanation. It makes a lot more sense now.
 
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