VAT has already been accounted for, but a win would be 'fantastic' says chief executive
Hastings Insurance is fighting HM Revenue & Customs over an estimated £8.6m VAT charge raised in 2008 as a challenge to the personal lines broker's VAT partial exemption status.
Hastings has launched an appeal and will slug it out at a VAT tribunal hearing. No hearing date has yet been set.
The appeal is similar to that of Gibraltar-based sister firm Advantage, which underwrites Hastings products, and car insurers Admiral and Zenith, as revealed by Insurance Times in November last year.
Hastings chief executive Ed Fitzmaurice said that provision for the VAT had already been accounted for as part of the £23m losses accrued during the year ended 30 June 2008.
“The way we look at it is that this doesn’t impact on our day-to-day business,” he said. “If [we win the appeal] that’s fantastic; if not we’ll address it at the time. The pain was taken a couple of years ago in terms of covering it.”
The insurer’s accounts for the year ended 30 June 2009 showed pre-tax losses reduced to £2.7m, while turnover remained broadly the same at £47.8m. Fitzmaurice said the results had improved because it was free of the exceptional losses occurred between 2007 and 2008. This included the VAT charge, a £3.6m settlement over a commercial dispute with Hanover Re, a £1.15m FSA fine for wrongly telling customers their policies were cancelled and costs from empty office space in Manchester.
Fitzmaurice, who staged a management buy-out of Hastings from Insurance Australia Group in February 2009, said the firm was growing strongly. He expected a full-year profit for 2010.
“When you look at the accounts, you are looking at snapshots of a recovery process of a business that was loss-making in 2008 and got sold off and restructured,” he said. He added that the firm’s customer service propositions had improved.
Following rounds of redundancies, and a shift to more online business, the staff count at the insurer now stands at 900, compared with 1,045 two years ago.
Fitzmaurice said that a £20m cash injection from Lloyd’s TSB would also help Hastings exploit growth opportunities.