Close

Do you store important customer data electronically?

Have you identified the potential risks that could affect your business as a result of a cyber-attack or data breach? What protection do you have in place? Learn more.

Looking for personal advice & cover?
0800 038 9733

Government Rate Increase to Insurance Premium Tax

 

The Current Insurance Premium Tax Changes

In November 2015, we saw an increase of 3.5% to the standard rate of Insurance Premium Tax (IPT), increasing the rate from 6% to 9.5%, then in October 2016 IPT increased 10%.

HM Revenue and Customs (HMRC) have announced a further increase of the standard rate from 10% to 12% with effect from the 1st June 2017. This instruction has been cascaded throughout the UK Insurance Industry.

Standard Rate IPT:

The rate increase is applicable to the standard rate of IPT only.

The higher rate of IPT which is charged for travel insurance, mechanical/electrical appliance insurance and some vehicle insurance, remains unchanged at 20%.

IPT Exemptions:

There are a number of exemptions from IPT, including:

  • most long-term insurance
  • reinsurance
  • insurance for commercial ships and aircraft
  • insurance for commercial goods in international transit
  • premiums for risks located outside the UK - these may be liable to similar taxes imposed by other countries

Mid Term Adjustments:

HMRC have not allowed a transition period.  They have allowed a backstop date of 1st June 2018 until which transactions effective prior to 1st June 2017 can be processed at the old IPT rate of 9.5%.

  • All additional premium MTAs on policies that incepted or renewed before 1st June 2017: 10% IPT.
  • All additional premium MTAs on policies that incepted or renewed on or after 1st June 2017: 12% IPT.
  • Return premium should be at the IPT rate paid originally by the customer, which is often the IPT rate at inception or renewal.

For the majority of our clients the standard rate of IPT will apply. The majority of insurers appear to be taking the same approach when implementing the rate increase on their systems. The rate applied to your renewal or any subsequent amendments to cover, will be clearly shown on your policy documentation. However, if you have any queries, please do not hesitate to speak to a member of the team here at Pavey Group.

Newsletter

Sign up to receive our newsletter featuring updates at Pavey Group and informative industry news.

Thank you for signing up for our newsletter