HMRC have published 'Revenue and Customs Brief 6 (2025): VAT deduction on insurance intermediary services supplied outside of the UK'. This explains a change in the right for input tax deduction for insurance intermediary services supplied outside the UK before 31 December 2023.
The publication of Revenue and Customs Brief 6 (2025) follows the First Tier Tribunal decision in Hastings Insurance Services Ltd v HMRC [2025]. The Brief is aimed at insurers, intermediaries and tax advisers.
- Insurance-related services are generally exempt for the purposes of VAT.
- VAT is therefore not charged on the supplies of exempt insurance services, and VAT incurred when making supplies of insurance-related services cannot be deducted.
- However, businesses can deduct input VAT if they are making 'specified supplies'.
- Specified supplies are certain financial and insurance services supplied to persons who belong outside the UK.
As a result of the findings in Hastings, insurance intermediaries supplying services outside the UK can rely on the direct effect of EU law to recover relevant input tax incurred before 1 January 2024, whether the insured party is in the UK or not.
From 1 January 2024, the right to deduct input VAT is restricted for insurance intermediary services where the final consumer (the insured party) belongs outside the UK.
For businesses that may be affected by the ruling, HMRC advise reviewing their input recovery on specified supplies for accounting periods ending on or before 31 December 2023.
If businesses believe they have a claim for under-recovered input tax, they should follow the rules on how to correct errors and make adjustments or claims. Where appropriate, they should submit an Error correction notice to HMRC, subject to the four-year time limit. They should provide:
- Documentary evidence to support the deduction.
- A revised Partial exemption calculation if they are partially exempt.
Useful guides on this topic
A beginner's guide to VAT
VAT: Where do I start? What is VAT? Who has to register for VAT? What rate should I charge? How do I calculate VAT? When are my VAT filing obligations?
Starting in business: VAT
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VAT Toolkit
This is our summary version of HMRC's output and input VAT toolkits, our version includes more detail, topics and planning points.
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