A. Compensation paid out as a result of an insurance claim is not exempt from VAT, but is outside the scope of VAT because it is not a consideration for a supply, being recompense for loss.
Although you are correct in that exempt income is included in the flat-rate scheme, outside the scope income is excluded. Paragraph 6.3 Notice 733 refers.
If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
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