The operation of Insurance Premium Tax (IPT): Call for evidence

The Government announced a call for evidence on Insurance Premium Tax (IPT) to ensure that it operates in a fair and efficient way, modernising the rules as needed to reflect commercial, regulatory, and other wider developments. The Government wants to make it as easy as possible for taxpayers to pay the right tax at the right time, while also exploring options for addressing instances of unfair outcomes.

The Government sought feedback on:

  • how the administration and collection of IPT can be modernised, to provide optimal efficiency for both business and HMRC
  • the extent to which there are emerging practices leading to unfair tax outcomes, and how these might be effectively addressed.

Unfortunately, the issues upon which most charities have concerns about IPT, the rate and exemptions, are stated as outside the scope of the consultation. However, the call for evidence notes:

“HMRC’s review is not limited in scope to the operational areas it has specifically identified. We therefore welcome your own ideas on other areas we could explore as part of the call for evidence to ensure IPT operates fairly and efficiently”.

IPT increased to 12% on 1 June 2017, up from 10%, and having been as low as 6% in October 2015.  IPT is a tax on insurers and so any impact on premiums depends on insurers’ commercial decisions, although providers usually pass on these costs. Charities do not benefit from any general exemptions and there has been concern that it could yet increase further to 20% in line with VAT.We would encourage all affected charities to complete our survey on the impact of the 2017 rate increase.

CTG will continue to work with sector partners to develop this evidence base to support our representations to Government for greater support for charities. While a a freeze on IPT increases for charities or the extension of existing limited reliefs would be the long term goal, we would welcome feedback from charities on any other administrative changes that would make the operation of IPT simpler.