HMRC is consulting until 17 July 2019 on ways to improve the administration and collection of insurance premium tax and identify certain practices which may create unfair tax advantages.
The government announced its intention at the Spring Statement in March 2019 to undertake an operational review of insurance premium tax (IPT). The review is needed to bring the rules up to date with changes in the insurance market since IPT was first introduced in 1994.
HMRC’s call for evidence seeks views on particular policy areas, including:
manipulation of administration and arrangement fees;
collecting information on exempt business through the IPT return;
removing certain registration requirements for IPT groups;
requiring additional information from captive insurers on registering for IPT; and
identification of unregistered insurers.
Administration and arrangement fees charged directly to customers have tended to replace broker commission paid on gross premiums. This has created scope for pricing structures designed to gain a tax advantage, since IPT is chargeable on gross premiums, whereas fees are not subject to IPT or VAT. Two suggested options for countering such practices are:
bringing certain administration fees into the scope of IPT where corporate structures are used to artificially manipulate the level of commission and fees received; or
extending the scope of IPT to include administration fees and align their treatment with commission.
HMRC believes collecting more detailed information on insurers’ exempt written premiums through IPT returns would help its analysis of overall compliance risks. Options being considered include the requirement to report specific information on:
gross general written premiums for UK risks;
gross general written premiums for UK and worldwide risks;
gross written premiums (general and long-term business) for UK risks; and
gross written premiums (general and long-term business) for UK and worldwide risks.
HMRC is considering removing the requirement for insurance groups with overseas members to register each member separately if they do not have a UK-resident director. This would reduce the administrative burden for such groups.
Captive insurers, those owned and controlled by their parent entity, are commonly located in overseas tax jurisdictions, which can lack transparency. The document suggests introducing a requirement for captive insurers who register for IPT to provide HMRC with details of their immediate and/or ultimate parent.
Options being considered to enhance HMRC’s powers to identify and prevent the use of unregistered insurers include:
a public online IPT register;
power to collect IPT from insured parties on current and concluded insurance contracts, rather than only on those which commence following the issue of a liability notice; and
legislating to allow HMRC to collect IPT from brokers who wish to make voluntary payment in respect of business placed with unregistered insurers.
HMRC would also welcome ideas from interested parties on other areas to explore as part of the call for evidence. The review is limited to the operation of IPT and will not consider matters relating to current IPT rates or exemptions.
HMRC is consulting until 17 July 2019 on ways to improve the administration and collection of insurance premium tax and identify certain practices which may create unfair tax advantages.
The government announced its intention at the Spring Statement in March 2019 to undertake an operational review of insurance premium tax (IPT). The review is needed to bring the rules up to date with changes in the insurance market since IPT was first introduced in 1994.
HMRC’s call for evidence seeks views on particular policy areas, including:
manipulation of administration and arrangement fees;
collecting information on exempt business through the IPT return;
removing certain registration requirements for IPT groups;
requiring additional information from captive insurers on registering for IPT; and
identification of unregistered insurers.
Administration and arrangement fees charged directly to customers have tended to replace broker commission paid on gross premiums. This has created scope for pricing structures designed to gain a tax advantage, since IPT is chargeable on gross premiums, whereas fees are not subject to IPT or VAT. Two suggested options for countering such practices are:
bringing certain administration fees into the scope of IPT where corporate structures are used to artificially manipulate the level of commission and fees received; or
extending the scope of IPT to include administration fees and align their treatment with commission.
HMRC believes collecting more detailed information on insurers’ exempt written premiums through IPT returns would help its analysis of overall compliance risks. Options being considered include the requirement to report specific information on:
gross general written premiums for UK risks;
gross general written premiums for UK and worldwide risks;
gross written premiums (general and long-term business) for UK risks; and
gross written premiums (general and long-term business) for UK and worldwide risks.
HMRC is considering removing the requirement for insurance groups with overseas members to register each member separately if they do not have a UK-resident director. This would reduce the administrative burden for such groups.
Captive insurers, those owned and controlled by their parent entity, are commonly located in overseas tax jurisdictions, which can lack transparency. The document suggests introducing a requirement for captive insurers who register for IPT to provide HMRC with details of their immediate and/or ultimate parent.
Options being considered to enhance HMRC’s powers to identify and prevent the use of unregistered insurers include:
a public online IPT register;
power to collect IPT from insured parties on current and concluded insurance contracts, rather than only on those which commence following the issue of a liability notice; and
legislating to allow HMRC to collect IPT from brokers who wish to make voluntary payment in respect of business placed with unregistered insurers.
HMRC would also welcome ideas from interested parties on other areas to explore as part of the call for evidence. The review is limited to the operation of IPT and will not consider matters relating to current IPT rates or exemptions.
