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

The Government has 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 is therefore seeking 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.

The full list of consultation questions can be found below and the deadline for responses (which should be sent by e-mail to [email protected]) is 17 July 2019.

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.

Consultation questions

  1. Is there evidence of a general shift in the insurance industry from commission-based broker remuneration to fee-based broker remuneration? If so, to what extent does this shift exist, and what do you understand to be the drivers behind it?
  2. Do you have evidence showing that some structures which take advantage of fee-based broker remuneration can impact on competitiveness within the industry and to what extent do you consider this an issue?
  3. If you think that administration and arrangement fees does pose a problem to the insurance industry, what views do you have on how this might be best addressed, including any views on the suggestions above?
  4. What information do you have to show the administrative impact on businesses from requiring the reporting of gross (general) written premiums?
  5. Is it feasible to split out gross written premiums for insurance contacts that cover nonUK risks and long-term business from the return?
  6. Do you have any information that would help to quantify the administrative burden for groups to register each member separately for IPT? For group registrations, would you welcome removing the requirement for each group member to have a UK resident director?
  7. Do you have information to help quantify the administrative impact on businesses from requiring captives to declare their parent?
  8. Do you have evidence to either support or contradict the view that unregistered insurers are an issue for industry?
  9. Would industry and consumers welcome a public IPT register?
  10. Is there evidence that a public register would assist with preventing unfair outcomes and deterring unlawful activity by enabling the detection of unregistered insurers?
  11. Changing the power of liability notices would encourage businesses to ensure that their insurer is registered for IPT. What would be the additional administrative work for this?
  12. Would brokers welcome the facility to pay for an IPT liability under limited circumstances?
  13. Would a facility for brokers to settle an insurer’s IPT liability discourage overseas insurers from registering for IPT and place an additional administrative burden on brokers?
  14. Are there any other areas relating to unfair outcomes or the administration of IPT which you believe HMRC should consider as part of this call for evidence?
  15. Are there any issues not mentioned above that the government should take into account as part of this review?
  16. Are there any further options or suggestions to tackle the concerns raised above that you would like the government to investigate further?
  17. Do you have any further comments?

Tell us how you are affected