Value-added tax
692. VAT and insurance claims
April 1999

 

 

VAT on insurance claims is often not properly accounted for.

 

When an indemnity payout is received for destruction, loss or damage to an asset used in a business enterprise. on which VAT was properly claimable on acquisition, output tax should he paid to the Receiver of Revenue. This is often not done as the recipient of the claim does not issue a tax invoice and the documentation received from the insurer does not record the obligation of the vendor to disclose such output tax. To exacerbate the problem, claims for major assets are often received piece meal.

 

With regard to insurance payments, the correct position is as follows:

 

Clearly, in order not to be out of pocket following an insurance claim, the insured value must include VAT.

 

Moores Rowland

VAT Act:S 8(8)