| Taxation in the United Kingdom |
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Insurance Premium Tax (IPT) is a type of indirect tax levied on general insurance premiums in the United Kingdom. [1]
The UK government introduced the Insurance Premium Tax to raise revenue from the insurance sector, which was viewed as being under-taxed, and not subject to Value Added Tax. [2] The main EU legislation regarding VAT (Council Directive 2006/112/EC) states that insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents, are exempt from VAT. [2] [3]
The Insurance Premium Tax was announced by Kenneth Clarke in the November 1993 budget [3] and introduced with the Finance Act 1994 which received Royal Assent on 3 May 1994. [4] IPT is under the care and management of HM Revenue & Customs. [4]
IPT raised £2.3 billion in the fiscal year 2009/10. [3]
The main law relating to IPT includes: [5]
There are two different insurance premium tax rates: [1]
Insurers providing taxable insurance are required to register and account for IPT, as must intermediaries who sell insurance subject to the higher rate of IPT and charge a separate insurance-related fee on top of the premium itself.
The Chancellor George Osborne stated in the 2016 spring budget that the standard rate of IPT would increase from 9.5% to 10% from 1 October 2016. [6]
In the 2016 autumn statement the new Chancellor Philip Hammond stated that the standard rate would increase from 10% to 12% from 1 June 2017. [7]
From 1 October 1994 to 31 March 1997, a single rate of 2.5% was charged. [3] [8] From 1 April 1997, two rates were charged:
All types of insurance risk located in the UK are taxable unless they are specifically exempted. Exemptions from this tax include: [5]
Businesses are required to register for IPT if they are: [1]
Businesses must be registered from the date they receive (or someone receives on their behalf) their first taxable premium. Businesses must inform HM Revenue & Customs within 30 days of forming the intention of receiving taxable premiums as the insurer. [1]
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