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VAT exemption on medical reports to save 100m

Life insurers will save 100m as a result of HM Revenue & Customs deciding to let medical services remain exempt from VAT, says the Association of British Insurers.

HMRC says that medical reports requested by insurers for protection insurance applicants will remain VAT-exempt from May 1, 2007, despite the European Court of Justice’s decision that these services should be taxable.

Following consultation with insurers, HMRC says UK law will be amended to allow services which constitute the provision of medical care to be exempt from VAT.

Services which will be VAT-exempt also include health screening under private medical insurance policies and medical services where an income protection policyholder has fallen ill and the aim is to assist them in returning to a normal life.

ABI spokesman Jonathan French says: “Based on a survey of members, the ABI calculated that the imposition of VAT on medical reports would have cost 100m a year. The announcement is very good news for customers and insurers as that 100m a year will now be saved.”

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