This week, we received 3 separate Vat queries on the matter of insurance and Vat. Here’s one of those queries, with a very interesting response from Peter Franck.

Peter Franck has been tackling your Vat queries on the Vat Helpdesk, and already, he has saved you millions in Vat! Now, that’s a great reason to be subscribed to The Practical Vat Loose Leaf Service. No other service gives you access to this sort of personalised, prompt response.

Question: Is the insurance excess we get from the client subject to Vat?

Answer: The amount of excess received from the insured client includes Vat. So, you must make out a tax invoice for the excess, and state that the amount paid “includes Vat at 14%”. The balance you receive from the insurance company also includes Vat at 14%.

Practical example:

You quote the insurance company R10 000 plus R1 400 Vat to repair a motorcycle. They authorise the repair and tell you to collect R2 000 excess from the insured driver.

You issue the insured driver with a tax invoice to the value of R2 000,and it states that this cost includes Vat. You issue a tax invoice to the insurance company for R9 400, also stating that the cost include Vat.

Remember that on your Vat201 return, you must show that you’ve received R11 400. Multiply it by 14/114, and account for R1 400 output tax. You received R245.62 Vat from the insured driver, and R1 154.38 Vat from the insurance company.

To find out more, refer to chapter I02 in the Practical Vat Loose Leaf. It’ll explain exactly how to do deal with insurance and Vat, step by step and also where to declare this on your Vat returns. Get it right the first time!

See how easy it to get practical Vat advice! All you need to do is subscribe to the Loose Leaf, send us your burning Vat question and Peter will answer it for you in 72 hours! He's got the know-how to make very complicated Vat dilemmas, easy to understand. Plus, he provides you with step-by-step instructions on how to apply it to your business.

Here's a sneak peak inside chapter I02:
 

• Is insurance taxable for Vat purposes? (I 02/002)
• 4 Critical facts you must know about Vat when you receive an insurance settlement (I 02/002)
• What happens when payment for repairs on an insured asset goes directly to the service provider? (I 02/005)
• Policies concluded with Lloyds of London? (I 02/006)
• Summary: Vat and Lloyds of London (I 02/010)
• What happens if an SA agent effects repairs to damaged aircraft in SA? (I 02/011)

Other questions our Vat Helpdesk tackled this week:

• If a VAT vendor receives an income protection policy payout, is this considered to be output income on which Vat must be declared?
• I have a client that is a tour operator.  They sell trips to other countries and as such there is no Vat leviable on the sales.  They need to know, and I am not sure how this works:  They sell the trip in Rand but purchase it from another tour operator in foreign currency. The client charges a mark-up on this trip - is the mark-up portion Vatable or not?

When you subscribe to the Practical Vat Loose Leaf Service, you’ll also have access to our Vat Helpdesk, where we answer your Vat questions by email within 72 hours.

For access to our Vat Helpdesk, start your 14 day risk-free trial now! You'll benefit from the Loose Leaf invaluable Vat tips, tools and checklists too.

Until next week,

Lenell Hattingh

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