The Hastings Insurance Services Ltd VAT tribunal decision has unlocked a major VAT reclaim opportunity for UK insurance suppliers, and momentum increased further when HMRC issued R&C Brief 6 (2025) in November 2025 inviting input VAT refund claims.
What the Hastings Insurance Services Ltd First‑tier Tribunal Decision Means for UK Brokers
Before 1 March 2019, UK VAT law matched EU VAT law in that UK suppliers of insurance-related services determined their input VAT recovery on their expenditure by reference to the proportion of their total income that was received from counterparts located outside the EU, regardless of where the insured parties were located.
However, UK VAT law was changed on 1 March 2019 such that their input VAT recovery was determined by reference to the proportion of their total income that was received in respect of insured parties located outside the EU, regardless of the location of the customers paying them their income. On 3 March 2025, the First-tier Tribunal confirmed that EU VAT law continued to have direct effect in the UK up to 31 December 2023.
How HMRC Brief 6 (2025) Unlocks New Input VAT Recovery Opportunities
This decision means that, for periods up to 31 December 2023, UK suppliers of insurance-related services have the option to take advantage of both EU VAT law (where it suits them) as well as UK VAT law (where it suits them). On 2 May 2025, HMRC confirmed that they accepted the decision and would not be appealing it.
In November 2025, HMRC issued R&C Brief 6 (2025) inviting input VAT refund claims.
Who Can Claim: The VAT Eligibility Criteria for UK Insurance Intermediaries
So, UK suppliers of insurance-related services can now claim additional input VAT recovery for periods up to 31 December 2023 where they have the following fact pattern:
- They received income from counterparts located outside the UK (this is because the UK left the EU at 11pm on 31 December 2020)
- That income related to insured parties located in the UK (which for VAT
- Purposes includes the Isle of Man, but excludes the Channel Islands)
- They restricted their input VAT recovery on expenditure relating to that
- Income in line with UK VAT law.
How UK Brokers Should Prepare and Submit Input VAT Repayment Claims
Where a UK supplier of insurance-related services fits the fact-pattern set out above, then they should file input VAT repayment claims to HMRC in respect of previous VAT returns filed with HMRC before input VAT drops out of time to be reclaimed under UK VAT law. Where they are not registered then they should apply to HMRC to register for VAT on a voluntary basis requesting an effective date of VAT registration that is four years before the date that the VAT registration application is filed with HMRC.
As a result of the above, many brokers, MGAs and intermediaries have been filing input VAT refund claims to HMRC and voluntarily registering for VAT where applicable. Based upon our experience, making VAT refund claims to HMRC following on from VAT court judgements does not lead to challenges from HMRC in respect of other taxes, eg to try to recoup VAT refunds made by collecting other taxes from a taxpayer.
What HMRC Checks When Reviewing VAT Refund Claims
HMRC will check VAT refund claims made to them for the following:
- Accuracy of claim calculations, particularly where only a proportion of
- Input VAT is being reclaimed
- Whether the necessary records are held, eg valid VAT invoices from
- Suppliers
- Whether any VAT amounts owed to HMRC by the claimant have been set off against the VAT refund claimed.
Why Specialist VAT Advice Helps Protect and Maximise Your Claim
Any reduction to the value of the claim because of errors made (as described above) might give rise to a careless error penalty of 15-30% of the amount by which the claim was reduced by HMRC. So, we advise that you obtain VAT advice from a specialist VAT adviser. Our experts will work on your behalf and invest significant time upfront in respect of the above before filing a claim to HMRC so that, when HMRC review the claim, HMRC should not have any reason to reduce the value of the claim.
If, for whatever reason, HMRC decide that they disagree with the principle of the claim, ie it is just not payable at all, then there is no penalty for any such claim rejection provided a full disclosure was made to HMRC when the claim was made, in accordance with HMRC’s VAT Manual VRM5100.
For further guidance on any issues raised in this article, please contact Mark Ellis.
