With storm Ciara passing through this week there will be lots of insurance claims to be settled.

If you are VAT registered and make an insurance claim, then the insurance company will not pay the VAT element of your claim. But his this does not mean you have to be out of pocket.

For small claims the insurance company may ask you to pay the full repair bill and then reimburse you for costs less VAT and your excess. If the repair bill is a business cost then VAT may be recovered in the usual way and the claim proceeds are treated as compensation so not subject to VAT.

But larger claims can often be settled differently – the insurance company arrange new goods or repairs direct and ask you to settle just the excess plus the VAT element. The VAT treatment is the same – you are entitled to recover the full VAT, on the full costs of new goods or repairs etc. The difficultly comes in entering it into your software.

We suggest you enter it as a bill plus a credit note. A bill for the full amount of the goods and/or repair, including the VAT element to be claimed. And then a credit note for the amount being settled by the insurance company direct, which is not subject to VAT.

Then the full cost to you is just the excess – plus of course all the hassle of disruption cause by mother nature.