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Insurance Premium Tax

Introduction

In the Autumn Statement 2016, the Chancellor confirmed an increase of 2% in the standard rate of Insurance Premium Tax (IPT) in the United Kingdom. This increase will see the standard rate move from its current 10% to 12%. This will be effective from 1st June 2017.

Approach to the change

The dates referred to below, whether “Inception date” “Renewal date” or “Effective date” mean the date the insurance cover commences, renews or changes and not the date the transaction was processed.

Exceptions

Where a higher rate (20%) applies including some types of travel insurance, mechanical/electrical appliances and some motor vehicle insurances. Also, some classes of business are exempt from IPT such as reinsurance, insurance for commercial goods in international transit and Business written in territories outside of the UK (local taxation rules apply).

New Business and Renewal transactions

IPT

Inception/renewal date before 1st June 2017 and processed before 1st June 2018

10%

Inception/renewal date before 1st June 2017 and processed after 1st June 2018

12%

Inception/renewal date on or after 1st June 2017

12%

Additional Premiums (APs)

IPT

Effective date of Mid Term Adjustment before 1st June 2017

10%

Effective date of Mid Term Adjustment on or after 1st June 2017

12%

Return Premiums (RPs)

IPT

Return premiums must be processed using the tax rate that was applied to the original transaction being adjusted irrespective of inception date or process date

10% or 12%

*The above is assumed to be correct as at 24/04/2017 unless advised otherwise by individual insurers

If you have any questions about the IPT changes, please do not hesitate to contact us or your Broker.