Insurance Premium Tax

InsideInsurance

Cotta wrote: »

One final query, the first response to this question advised that Travel Insurance is 20%, is this always the case or only when bought outside of an insurance company?

Its all travel, see http://www.hmrc.gov.uk/manuals/ipt/ipt04905.htm

Cotta

Ok, I think I have it but please correct me if I'm wrong?

All insurance sold by insurance companies is subject to an insurance levy of 6% with the exception of Travel insurance which always has a levy of 20%.

Insurance sold outside of the main insurance industry has a levy of 20%.

The only policies excempt from IPT are Life and Critical Illness.

InsideInsurance

No, it is more complex

Reinsurance has no IPT, nor does long term insurance (which is how Life, CI etc avoid it), the Chanel Tunnel also has special rules applied and so do lifeboats and the disability mobility scheme etc

If you want to get into the details of it then look at the sections under http://www.hmrc.gov.uk/manuals/ipt/IPT04000.htm

Cotta

InsideInsurance wrote: »

No, it is more complex

Reinsurance has no IPT, nor does long term insurance (which is how Life, CI etc avoid it), the Chanel Tunnel also has special rules applied and so do lifeboats and the disability mobility scheme etc

If you want to get into the details of it then look at the sections under http://www.hmrc.gov.uk/manuals/ipt/IPT04000.htm

Interesting that renewals are not subject to this levy.

Are critical illness and Life policies always excempt?

InsideInsurance

Cotta wrote: »

Interesting that renewals are not subject to this levy.

Are critical illness and Life policies always excempt?

Where do you get that renewals arent subject to IPT?

The HMRC pages give you the definitions, as usual with tax (and law in general) they use definitions rather than simply naming products otherwise people would circumvent the rules by simply renaming products to something that attracts lower taxation.

I would be surprised if it werent possible to write a product that was similar to life but did attract IPT by not meeting the definitions but on the basis companies dont want to have to pay taxes then you'll find that they do all thats possible to stretch the terms rather than avoid them.

Cotta

InsideInsurance wrote: »

Where do you get that renewals arent subject to IPT?

The HMRC pages give you the definitions, as usual with tax (and law in general) they use definitions rather than simply naming products otherwise people would circumvent the rules by simply renaming products to something that attracts lower taxation.

I would be surprised if it werent possible to write a product that was similar to life but did attract IPT by not meeting the definitions but on the basis companies dont want to have to pay taxes then you'll find that they do all thats possible to stretch the terms rather than avoid them.

Sorry I mixed up renewals with reinsurance.

BJV

Cotta wrote: »

Good Example and helps to make sense on the issue one have have two points queried in bold above.

One final query, the first response to this question advised that Travel Insurance is 20%, is this always the case or only when bought outside of an insurance company?

A dealership is legally bound to pay VAT on the cost of any new car but they must also pay on any profit they make.

If they reduced the cost of the car the amount of vat they would pay at the higher rate there total profit would be higher. Yes the price of the insurance policy was higher but the rate of IPT they had to pay was lower.

Sorry sounds confusing

E.g 20% of £1000 and 6 % of £300. Tax 218

or 20% of £250 and 6 % of £1300. Tax 128

This means higher retained profit.

Also when you say surely they would just pay what which ever was less? No ethical dealerships did not but there was a monetary incentive so a lot did and this is why the loop hole was closed.

FlameCloud

You are asking some very strange questions.

InsideInsurance

Someone has just moved jobs from simple PL insurer to a much broader role in a brokers hence coming across new concepts