Your friend is right — and it's good you're checking rather than assuming.
Insurance is VAT-exempt
Insurance transactions are specifically exempt from VAT under UK VAT law (HMRC sets this out in VAT Notice 701/36). That's exactly why your broker's invoice shows no VAT on the £1,400 premium: there was no VAT charged, so there's no VAT for you to reclaim. You can only reclaim VAT that was actually charged to you — and on exempt supplies, none is. This applies to both the underlying insurance and the broker's arranging services in the normal course of things.
Don't confuse VAT with Insurance Premium Tax
The one thing that sometimes catches people out is Insurance Premium Tax (IPT). IPT is a separate tax levied on most general insurance premiums, and it's built into the premium rather than shown as VAT — and crucially, IPT can never be reclaimed either. So when you look at your invoice and see neither VAT nor recoverable IPT, that's exactly how it should be. There's no hidden claim you're missing.
What to do instead
Put the full £1,400 through your books as a business expense. Professional indemnity and public liability cover for your studio are wholly and exclusively for the business, so they're allowable against your profits. Just record it with zero VAT — don't be tempted to include anything in Box 4 of your VAT return. The only nuance worth knowing: if your broker ever charged you a separate, standalone taxable service fee (for example, consultancy work unconnected with arranging the insurance), VAT on that fee would be recoverable — but that's the exception, not the rule.
Bottom line
- No VAT on the premium means nothing to reclaim.
- Claim the full £1,400 as a business expense instead.
- Keep the broker's invoices as normal expense evidence — there's no VAT documentation issue here.
