HMRC has published its policy paper on new rules relating to use and enjoyment of insurance repair.

The new measures seek to counter perceived VAT avoidance by UK insurers who arrange for insurance to UK customers to be provided by a company based off-shore and outside the scope of VAT. Where insurance repairs are charged to the offshore company, no VAT was applicable.

Insurance companies are usually wholly exempt businesses for VAT purposes and any VAT charge is not recoverable. The new rules, which will come into force on 1 October 2016, widen the “use and enjoyment” provisions to include repair services so that the place of supply for such services will be need to be the UK.

The policy paper can be found here.