Insurance premium tax and direct debits

Flora72

I've just been sent an email from Animal Friebds insurance stating that due to the rise in IPT they are going to increase my direct debit by the requisite amount. Surely, as my annual policy started in January, the fact I pay by direct debit is inconsequential and they should not increase my premium due to IPT rises until the renewal? Is there any official guidance on this? I see that Aviva have made a statement that this is their take on it, but is it optional?

rs65

Flora72 wrote: »

IIs there any official guidance on this?

Yes, from HMRC

https://www.gov.uk/government/publications/insurance-premium-tax-increase-to-standard-rate/insurance-premium-tax-increase-to-standard-rate#detailed-proposal

agrinnall

Doesn't really answer the OP's question on whether the insurer's action is correct though does it?

rs65

All depends on their accounting scheme. I can't answer but feel free.

Flora72

Thanks for that - I think it does answer the question and that Animal Friends are in the wrong. The contract was entered into in January.

"The new standard rate will be due on premiums treated by the legislation as received on or after 1 November 2015, except where insurers operate a special accounting scheme. In that latter case, the new standard rate is only applied to premiums relating to risks covered by the terms of a contract entered into after 1 November 2015. From 1 March 2016, the new standard rate applies to all premiums, regardless of when the contract was entered into."

molerat

Would it depend on if you are paying a monthly premium or paying a monthly instalment on a credit agreement ? Have you got a credit agreement ?

dacouch

I suspect they may operate a monthly policy.

I think Animal Friends are on next week's (The coming week) episode of BBC Watchdog...

Flora72

Good point. I've gone back to my original documentation and it is a monthly policy, so they are legally allowed to do this. Darn it.
Thanks for helping me unravel it.

rs65

Flora72 wrote: »

I've gone back to my original documentation and it is a monthly policy, so they are legally allowed to do this.

In a monthly policy its not that they are allowed to do it, they legally have to do it. The extra 3.5% gets passed to the treasury - the insurer doesn't benefit from it.