Insurers are at risk of being hit with a bill for VAT on medical reports following a clarification of the European sixth directive on VAT issues in the European Court of Justice.
At present, UK law states there is no need to charge VAT for services provided by certain categories of people, such as registered medical practitioners. But the clarification says such activities are only exempt if undertaken with a therapeutic aim.
ABI taxation manager Leigh Francis says this could affect insurers at the underwriting and claim stage. He says UK Customs & Excise is to investigate on whether UK legislation complies. Product providers say a change could increase the cost of reports by up to £15.
Francis says the ABI has arranged an early meeting with Customs & Excise to put forward the potential implications for insurers and it may also make submissions to the EU as part of its financial services review.
He says: “There may be ways around this that we need to explore. We are taking it forward to try and make sure that any changes in UK law are enough to ensure that the UK legislation complies with the European Court of Justice interpretation but no further.”
Abbey for Intermediaries head of protection, marketing and product development Nick Kirwan says: “This looks awfully like a stealth tax to me, which ultimately will get passed back to the consumer.”