IPT Changes effective 01 November 2015

This Document explains Insurers response to the increased rate of Insurance Premium Tax (IPT), effective from 01st November 2015

Introduction

In the Summer Budget, announced 8 July 2015, the Chancellor confirmed an increase of 3.5% in the standard rate of IPT. This will be effective from 1 November 2015. This increase will see the standard rate move from its current 6% to 9.5%

Standard Rate IPT

The rate increase is applicable to standard rate IPT only. The higher rate of IPT – charged for travel insurance, mechanical/electrical appliances 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.

New Business and Renewal transactions:

Inception/renewal date before 1 November 2015: 6%

Inception/renewal date on or after 1 November 2015: 9.5%

Mid Term Adjustments (MTAs) on policies incepted or renewed before 1 November 2015:

 Refund Premiums (RPs):

• Effective date of MTAs before 1 November 2015: 6%
• Effective date of MTAs on or after 1 November 2015: 6%
• Additional Premiums (APs):
• Effective date of MTAs before 1 November 2015: 6%
• Effective date of MTAs on or after 1 November 2015: 9.5%

Implication for Clients

In order to ensure compliance with the new IPT rates, please make sure you understand the increase in the tax and the financial implications as there could be a change to the IPT rate in between one renewal and another.

This document should provide clarity on the rates to be applied from a customer point of view.

More information can be found on the Gov.UK website:

https://www.gov.uk/government/publications/notice-ipt-1-insurance-premium-tax

If you have any questions, please contact our team on 0151 255 2600.