Changes to Insurance Premium Tax
The Chancellor announced in his budget of July 8th that the standard rate of Insurance Premium Tax (IPT) would, from 1st November 2015, increase to 9.5%. This only applies to the standard IPT rate. Other rates, such as those affecting travel products, will remain unaffected by this change.
We have included guidelines to help you interpret how the changes should be implemented below
Policies incepted or renewed on or after 1st November 2015
Will attract the new IPT rate of 9.5% regardless of when the quote was provided or any rate guarantees that may apply.
Will attract the new IPT rate of 9.5% for any mid-term change which results in payment of an additional premium.
Policies incepted or renewed prior to 1st November 2015
Will attract the “old” rate of IPT of 6%.
Where a mid-term change takes place after 01/11/2015 which results in an additional premium, the new IPT rate of 9.5% should apply to the additional premium.
Regardless of the date of change, where one or more MTA takes place and different rates of IPT have been applied (i.e. 6% on inception premium but 9.5% for an MTA) or cancellation takes place that results in a refund of premium being due, ideally IPT will be apportioned. However HMRC accept that systems may be unable to do so in which case the overriding consideration is that the rebated IPT must not exceed the rate at which IPT was originally paid. Therefore if the system is unable to apportion IPT the rebate of IPT on the refund of premium will be at the 6% rate.