VAT on accident damage

I’ve been confused about whose responsibility  it is for paying VAT on accident damage repairs to courtesy cars that have been provided by garages.

You see, some insurers are asking motorists to pay the VAT element of the repair invoice where a courtesy car has been covered under a customer’s own insurance policy.

Anyway, I decided to get an answer so I contacted HMRC for clarification.

I got a reply and after reviewing HMRC’s response, I’ve come up with this guidance for bodyshops:

  • Where the damage is covered by a policyholder’s own insurance policy and the policyholder is VAT registered, the policyholder is directly responsible for paying the VAT element of the repair invoice together with any excess, usually directly to the garage.
  • Where the damage is covered by a policyholder’s own insurance policy and the policy holder is not VAT registered, the invoice, less any excess, should be settled by the insurer covering the claim, including the VAT element.
  • Where the damage is covered on a repairer’s motor trade policy and the repairer is VAT registered, the repairer is responsible for the VAT element of the invoice and the customer is responsible for any excess.

Clear? ‘As pea soup’, you’re probably thinking.

Well, anyway,  if you’ve been experiencing issues, especially unreasonable pressure for the repairer to not charge the insurer the VAT content, you’re now, hopefully, a little better informed than before you read this.

What do you think?

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