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- Insurance Premium Tax Is Increasing: What You Need To Know
Insurance Premium Tax Is Increasing: What You Need To Know
In the Autumn Statement 2016, the UK Government announced that the standard rate of Insurance Premium Tax (IPT) will increase from 10% to 12%, with effect from 1 June 2017. The higher rate of 20% for insurance supplied with selected goods and services (such as all travel and certain motor and domestic appliances) remains unchanged.
The following IPT rules apply:
- All new policies and renewals that start on or after the 1 June 2017 will be charged at the new IPT rate of 12%
- Mid-term adjustments (MTA) with an additional premium that incepted or renewed prior to 1 June 2017 will be charged at the old, 10%, rate of IPT
- Return premium, refunds or cancellations, will be subject to the rate of tax originally charged on the premium that is being adjusted
- There is a backstop date of 1 June 2018 at which point IPT will be 12% for all new and additional premiums; unlike previous rate changes there is no transitional period.
Mid-Term Adjustments – ‘New Risk’
Any additional premium received by the insurers in respect of a ‘new risk’ for which cover began after the implementation date of 1 June 2017 will be liable to tax at the new rate of 12%.
An MTA will qualify as a ‘new risk’ if it is processed as a new policy and thus not attached to the original policy.
If you require further information on this circular or IPT more widely, please see the ‘IPT Rate Application Table’ in the PDF, or contact us for more information.