Insurance premium tax - separate contracts
The measure
Insurance premium tax (IPT) is paid on the gross premium charged under a taxable insurance contract. However, the legislation previously stated that where an amount was charged under a separate contract and separately identified to the insured then it would fall outside the scope of the definition of a premium. New legislation will be introduced in Finance Bill 2010 to amend this provision (which HMRC have viewed as giving rise to a 'premium splitting' avoidance scheme). The new legislation will therefore bring certain fees charged under these separate contracts into the scope of IPT.
Who will be affected?
Insurers and businesses which charge private individuals for administration services connected to contracts of insurance.
When?
The new legislation will have effect for payments made on or after 9 December 2009.
An expected measure in light of the recent Homeserve GB Ltd High Court decision where the taxpayer was successful in arguing that such amounts fell outside the scope of IPT.
