16 Jul Insurance Premium Tax changes
Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are currently two rates; a standard rate of 6% and a higher rate of 20%. The higher rate applies where insurance is sold in relation to goods and services which are subject to VAT and to travel insurance.
As part of the Summer Budget measures the standard rate of IPT is to be increased from 6% to 9.5% from 1 November 2015. The IPT standard rate will remain lower than that of many other EU Member States.
From 1 November 2015 all premiums received by insurers using the IPT cash accounting scheme will be charged at 9.5%. For insurers using the special accounting scheme, there will be a 4 month concessionary period that will begin on 1 November 2015 and end on 29 February 2016, during which premiums received that relate to policies entered into before 1 November 2015 will continue to be liable to IPT at 6%. From 1 March 2016 all premiums received by insurers will be taxed at the new rate of 9.5%, regardless of when the policy was entered into.
New VAT provisions will also be introduced to deter insurers from routing costs via offshore associates and to ensure that UK VAT is accounted for on all repair services on UK insurance contracts.