A VAT loophole was closed on 1st October which had previously allowed insurance companies providing a repair under an insurance contract to divert VAT outside of the UK. The VAT (Place of Supply of Services: Exemptions etc) Order 2016/726 amended the VAT Act 1994 by adding a new paragraph 9D to schedule 4A. The new law means that where the services are effectively used and enjoyed, eg a UK customer shaving their UK car repaired by a UK garage, then the place of supply for VAT is to be the UK. Even if the insurer, to avoid VAT, has diverted the contract with the garage to outside the EU.
Tax Barrister, Accountant