Insurance Premium Tax 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 an exemption so will be impacted.
Earlier this year CTG Chairman John Hemming commented on the recent Insurance Premium Tax increase:
“This Government revenue raiser has a disproportionate impact on charities (especially those with a large portfolio of operational buildings and extensive transport and travel commitments) and we have serious concerns about rumours that IPT may eventually be increased to 20%, in line with VAT.
“CTG recently launched a charity IPT survey which has received almost 100 responses to date and we plan to publish the findings of this survey later this month as part of our Budget representations. A large number of village halls have responded to our survey and while in monetary terms the additional cost is relatively low, their IPT burden now represents a significant proportion of their overall expenditure. For the largest five payers in our survey alone, the increase will cost a total of £170,000, with their total IPT costs in 2017 now over £1m. The survey also indicates that in addition to buildings, contents, motor and travel insurance charities pay a wide range of different premiums.
“CTG is working with the Association of British Insurers (ABI) and sector partners to develop this evidence base to support our representations to Government for a freeze on IPT increases for charities or the extension of existing limited reliefs. While we recognise that it would be inappropriate for charities to benefit from exemptions on private medical insurance for staff, there is a very strong case for relief where insurance is a necessary and responsible requirement as part core charitable activities.
“We would encourage all affected charities to complete our survey https://www.charitytaxgroup.org.uk/consultation/survey-assess-cost-insurance-premium-tax-increase/”
In response to a series of parliamentary questions on whether it would consider setting a special rate of IPT for charitable organisations, Government Ministers have ruled out such a step arguing that “any such legislation would be very difficult for insurers to implement since this would require them to differentiate between customers who were buying the same type of insurance products”.