Consultancy claim

My client is a consultant Mr A who is in dispute with one of his clients Mr B. Unfortunately Mr B has refused to pay one of Mr A’s invoices and they are now in arbitration proceedings.

Mr A’s solicitor has been representing him in the claim against the client and the legal fees will be paid by Mr A’s insurance company linked to his debt protection policy but not the VAT element because my client is VAT registered.

My client (Mr A) uses the flat-rate VAT scheme (14.5% applying) and therefore cannot claim input tax so he is effectively out of pocket with the VAT on the legal fees and my questions relate to this.

Would the insurance company recognise the scheme and agree to pay the VAT element? Is there any way that...