Insurance Premium Tax (IPT) Increase
June 1, 2017
CLA Insurance is committed to keeping all of our clients fully aware of any changes to regulation and how this may impact them. In the Chancellor’s autumn statement it was announced that the standard rate of IPT will rise from 10% to 12% from 1 June 2017.
How will the increase affect me?
The increase to the standard rate of IPT will impact on all classes of general insurance including Property, Liability and Motor related policies.
The higher rate of IPT charged for insurance supplied with selected goods and services at 20% (including travel insurance, mechanical / electrical appliances insurance and some vehicle insurance) remains unchanged.
The practical implications
For any policy placed on or after the 1st June 2017, the standard rate of IPT will be levied at 12%.
Any amendments on or after 1st June 2017 resulting in a return premium will be processed using the tax rate that was applied to the original transaction.
Additional premiums in relation to risks that commenced prior to 1 June 2017 may be taxed at the 10% rate if they are processed before 1 June 2018. However, if a “new risk” attaches on or after 1 June 2017 to an existing policy, then the 12% rate of IPT should be applied.
Where premiums are paid in instalments and cover commenced before 1 June 2017, the existing 10% rate will apply, subject to the instalment being processed before 1 June 2018.
Some Insurers use the Special Accounting Scheme which may give variations to the application of the change on IPT. Our clients will be informed as necessary should this apply.
Our position and next steps
We will continue to communicate proactively with our clients on all matters relating to their policies. In the meantime, please do not hesitate to contact your account handler if you would like to discuss further.