Readers’ forum: Letting agent

My client trades as a letting agent acting for residential landlords. As part of his service he encourages landlords to take out an insurance policy which guarantees payment of the rent in the event that a tenant defaults on their payments.

My client is charged an annual premium of £90 for each tenant by the insurance company as long as the monthly rent is no more than £900 and the tenant has passed the usual credit checks. My client then charges £250 to the landlord to cover his time and costs and gives details about the landlord to the insurance company; in other words in the event of a future claim.

My question concerns the VAT liability of the £250 charge to the landlord: is this exempt from VAT as a supply of insurance or is £160 exempt from VAT as...