Insurance Premium Tax (United Kingdom)

Tax Taxation in the United Kingdom Double Irish arrangement
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Insurance Premium Tax (IPT) is a type of indirect tax levied on general insurance premiums in the United Kingdom.[1]

Overview

The UK government introduced the Insurance Premium Tax to raise revenue from the insurance sector, which was viewed as being under-taxed, and not subject to Value Added Tax.[2] The main EU legislation regarding VAT (Council Directive 2006/112/EC) states that insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents, are exempt from VAT.[2][3]

The Insurance Premium Tax was announced by Kenneth Clarke in the November 1993 budget[3] and introduced with the Finance Act 1994 which received Royal Assent on 3 May 1994.[4] IPT is under the care and management of HM Revenue & Customs.[4]

IPT raised £2.3 billion in the fiscal year 2009/10.[3]

Law

The main law relating to IPT includes:[5]

Rates

There are two different insurance premium tax rates:[1]

Insurers providing taxable insurance are required to register and account for IPT, as must intermediaries who sell insurance subject to the higher rate of IPT and charge a separate insurance-related fee on top of the premium itself.

The Chancellor George Osborne stated in the 2016 spring budget that the standard rate of IPT would increase from 9.5% to 10% from 1 October 2016.[6]

In the 2016 autumn statement the new Chancellor Philip Hammond stated that the standard rate would increase from 10% to 12% from 1 June 2017.[7]

Historic rates

From 1 October 1994 to 31 March 1997, a single rate of 2.5% was charged.[3][8] From 1 April 1997, two rates were charged:

Standard rate

Higher rate

Exemptions

All types of insurance risk located in the UK are taxable unless they are specifically exempted. Exemptions from this tax include:[5]

IPT registration

Businesses are required to register for IPT if they are:[1]

Businesses must be registered from the date they receive (or someone receives on their behalf) their first taxable premium. Businesses must inform HM Revenue & Customs within 30 days of forming the intention of receiving taxable premiums as the insurer.[1]

See also

Notes and references

  1. ^ a b c d "Insurance Premium Tax: guide for insurers". www.gov.uk. HM Government. Retrieved 29 December 2014.
  2. ^ a b IPT - Insurance Premium Tax Manual. IPT03150: HM Revenue & Customs. Retrieved 29 December 2014.CS1 maint: location (link)
  3. ^ a b c d Seely, Antony (29 June 2010). Standard Note - SN1425 - Insurance premium tax (PDF). House of Commons Library. Retrieved 29 December 2014.
  4. ^ a b IPT - Insurance Premium Tax Manual. IPT03200: HM Revenue & Customs. Retrieved 29 December 2014.CS1 maint: location (link)
  5. ^ a b "Notice IPT1: Insurance Premium Tax". www.gov.uk. HM Government. Retrieved 29 December 2014.
  6. ^ "Budget 2016 - GOV.UK". www.gov.uk. HM Government. Retrieved 20 April 2017.
  7. ^ "Autumn Statement 2016 - GOV.UK". www.gov.uk. HM Government. Retrieved 20 April 2017.
  8. ^ "Insurance premium tax". www.ifs.org.uk. Institute of Fiscal Studies. Retrieved 29 December 2014.
  9. ^ http://uk.reuters.com/article/britain-budget-insurance-idUKL5N16N3EV
  10. ^ PA; PA. "Fresh increase for insurance premium tax 'outrageous'". AOL Money UK. Retrieved 23 November 2016.
  11. ^ "Autumn Statement 2016 - GOV.UK". www.gov.uk. Retrieved 23 November 2016.
  12. ^ Customs.hmrcgov.uk