HMRC has set out the current position with regard to VAT and insurance intermediary services supplied outside the UK in Revenue and Customs Brief 6 (2025). 

Background

Where certain conditions are met, businesses supplying exempt insurance services are entitled to recover the input tax incurred in making those services. The conditions include that the person to whom the services are supplied belongs outside the UK (EU before 1 January 2021). A new condition was introduced with effect from 1 March 2019, requiring that the person to be insured belongs outside the UK. This is referred to here as the “insured party condition”.

In Hastings Insurance Services Ltd (2025) UKFTT 275 (TC), the First-tier Tribunal (FTT) found that the introduction of the insured party condition was not compatible with the EU Principal VAT Directive 2006/112/EC and that Hastings Insurance Services Ltd could rely on the direct effect of EU law to recover the relevant input tax. HMRC has not appealed the decision of the FTT.

Separately, legislation was enacted with the effect that businesses are unable to rely on the direct effect of EU law from 1 January 2024. 

The current position, as confirmed by HMRC in Revenue and Customs Brief 6 (2025), is that the insured party condition applies from 1 January 2024 but not before that date. 

Action to take

Insurance intermediaries supplying relevant services outside the UK are encouraged to review their input tax recovery on specified supplies made during accounting periods ending on or before 31 December 2023. If they find they have under-recovered input tax, they should follow the rules on how to correct errors and make adjustments or claims. 

Where appropriate, the business should submit an error correction notice to HMRC, subject to the four-year time limit. The claim should include:

• documentary evidence to support the right to deduct; and 
• where the business is partially exempt, revised partial exemption calculations.

The Brief provides links to further information and explains how to contact HMRC. 

Further information

• The Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (SI 1999/3121), reg. 3 and 3A