Insurance Premium Tax (“IPT”) is a tax on general insurance premiums. There are two rates:

• a standard rate of 10 per cent (from 1 October 2016), and
• a higher rate of 20 per cent for travel insurance and some insurance for vehicles and domestic/ electrical appliances.

The following categories of insurance are exempt from IPT:

• reinsurance
• life assurance, permanent health insurance and all other “long term” insurance except medical insurance
• commercial aircraft and some associated liabilities
• commercial ships and some associated liabilities
• lifeboats and lifeboat equipment
• foreign or international railway rolling stock and some associated liabilities;
• export finance
• commercial goods in international transit
• block insurance policies held by Motability which covers all disabled drivers who lease their cars through the scheme
• risks located outside the UK
• the Channel Tunnel, and
• spacecraft

For the purposes of the exemption, a lifeboat is a vessel used, or to be used, solely for rescue or assistance at sea. “Lifeboat” includes conventional lifeboats and other vessels used solely in connection with life-saving activities at sea. Lifeboat equipment is defined as anything used, or to be used, solely in connection with a lifeboat and it includes carriage equipment, tractors, winches and hauling equipment used solely for the launching and recovery of lifeboats. “Lifeboat equipment” does not include boathouses and slipways.

The exemption does not extend to policies covering rescue craft to be used on inland waterways, lakes and reservoirs. Policies which relate to the construction of lifeboats are also not exempt from IPT. The exemption does, however, extend to new, completed lifeboats not yet used but to be used for rescue at sea and to policies relating to lifeboats used for training personnel in rescue at sea (but not to vessels which are not lifeboats, even though they may be used to train personnel in lifesaving skills).

Block insurance policies held by Motability, under which all those disabled drivers who lease their vehicles under the Motability scheme are insured, are exempt. The exemption does not extend to disabled drivers generally.