Insurance claim, I pay the VAT??

[Flipatron]

My 3 month old VW Transporter was rear ended yesterday, third party admitted liability.

Rang my insurers today, they stated that any claim would be settled but the VAT portion would need to be paid by my limited company then claimed back when our next VAT quarter is due. The van is in the company name, the insurance in mine.

I queried this but was told it's standard practice, is this right?

I can't work out how I'd be able to claim the VAT back when my company hasn't paid the full costs (including VAT) in the first place. To make things more difficult I'm registered with the flat rate scheme so any expense below £2000 I can't reclaim.

I feel like I'm going to be £££ out of pocket here through no fault of my own.

[Butter Face]

Did you buy the van new as a VAT qualifying purchase?

Sounds like you are going to lose out on it unfortunately.

[Flipatron]

Butter Face said:

Did you buy the van new as a VAT qualifying purchase?

Sounds like you are going to lose out on it unfortunately.

Yes VAT claimed on the purchase price.

[Butter Face]

Flipatron said:

Yes VAT claimed on the purchase price.

How did you do that if you’re on the flat rate scheme? Was it exempt as it was a capital asset?

I think TBH you need to speak to your accountant, my understanding would be that the insurer pays you +VAT and you will pay HMRC the VAT again. Treat it as if you were simply selling the vehicle on to another VAT registered company.

I could be way off, your accountant should know though. Unless you deal with your own?

[Old Merc]

Its normal practise,it happened to me when I was in business. As you are on the flat rate scheme I think you will loose out ? Have a word with your accountant there may be a way to claim it back.

[Flipatron]

Sounds like one for the accountant tomorrow.

[ymwoods]

Defo speak to your accountant, as I am not one, but I was on the flat rate scheme a few moons ago and it is correct that you pay the VAT and then claim it back on your next return. Not sure why it's like that, I was just as confused too.

[Countdown]

Flipatron said:

My 3 month old VW Transporter was rear ended yesterday, third party admitted liability.

Rang my insurers today, they stated that any claim would be settled but the VAT portion would need to be paid by my limited company then claimed back when our next VAT quarter is due. The van is in the company name, the insurance in mine.

I queried this but was told it's standard practice, is this right?

I can't work out how I'd be able to claim the VAT back when my company hasn't paid the full costs (including VAT) in the first place. To make things more difficult I'm registered with the flat rate scheme so any expense below £2000 I can't reclaim.

I feel like I'm going to be £££ out of pocket here through no fault of my own.

Yes and No.

If the insurers think you can recover the VAT element they will only refund the Nett cost of repairs (excl VAT) on the assumption that you can reclaim the VAT element of the Repair Garage invoice from HMRC. [Obviously they dont want to pay you for costs you can reclaim from elsewhere]

If for any reason you aren’t able to reclaim the VAT on the repairs from HMRC they should refund you the Gross amount.

[Flipatron]

Countdown said:

Yes and No.

If the insurers think you can recover the VAT element they will only refund the Nett cost of repairs (excl VAT) on the assumption that you can reclaim the VAT element of the Repair Garage invoice from HMRC. [Obviously they dont want to pay you for costs you can reclaim from elsewhere]

If for any reason you aren’t able to reclaim the VAT on the repairs from HMRC they should refund you the Gross amount.

That sounds right and how I thought It'd work.

[Burgerbob]

PF62's reply is a good response.

Another option is to leave the flat rate scheme, but you should do it with effect from before the date of the repairs. You them won't be able to rejoin the flat rate scheme for 12 months so you'll have to weigh up the options and crunch some numbers.

However, I've often found that the flat rate scheme may be easier administratively* but doesn't always work out better financially.

• although this is questionable as you should keep proper records anyway thereby negating the need for the scheme

[Flipatron]

PF62 said:

And if your insurer won't pay, then just add it to the list of uninsured losses for the third party to pay.

Thanks

[TwigtheWonderkid]

Countdown said:

If the insurers think you can recover the VAT element they will only refund the Nett cost of repairs (excl VAT) on the assumption that you can reclaim the VAT element of the Repair Garage invoice from HMRC. [Obviously they dont want to pay you for costs you can reclaim from elsewhere]

If for any reason you aren’t able to reclaim the VAT on the repairs from HMRC they should refund you the Gross amount.

Correct. A call to your insurer telling them you cannot reclaim the vat, and why, and they should pay it without a problem.

[surveyor]

TwigtheWonderkid said:

Countdown said:

If the insurers think you can recover the VAT element they will only refund the Nett cost of repairs (excl VAT) on the assumption that you can reclaim the VAT element of the Repair Garage invoice from HMRC. [Obviously they dont want to pay you for costs you can reclaim from elsewhere]

If for any reason you aren’t able to reclaim the VAT on the repairs from HMRC they should refund you the Gross amount.

Correct. A call to your insurer telling them you cannot reclaim the vat, and why, and they should pay it without a problem.

I had this situation. As soon as I pointed out that to me it was an irrecoverable loss they paid out.