... They won't do that ...
I get a better offer when trading my car in with the accident damage, I can use the cash as part payment to buy a new car. The insurance company are not giving me that optoin, they tell me if it is not repaired they will not pay the VAT even though they agreed the amount including VAT, not in my terms and conditions on my policy (or anybody's policy). Sharp practice on their part!
Your argument is that I did not get the car repaired so I am not entitled to the VAT, if I follow this line of thought then I am not entitled to any money because I did not get the car repaired.
I am entitled to all or I am entitled to nothing, this is just a cheap nasty trick by insurance companies to avoid paying VAT.
A few years ago I was hit by another car, I put in a claim using the estimate from my garage for repairs, the third party insurance company paid in full on the estimate. This time becaue I claimed off my own policy they deducted the VAT and said there is nothing I can do about it. One rule for claims off your own policy and another for claiming from a third party - is it legal?
They should pay the VAT becaue it is part of the cost of repairing the car, it is not up to them to decide if I get the car reapired or not, they agreed the value of the damage (including VAT) so they pay that amount, this is nothing to do with the revenue (I phoned them and asked them).
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