UK IPT increase guidance from LIIBA IUA and ABI |
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1 December 2010 Below is a circular issued by the London & International Insurance Brokers Association (LIIBA), which outlines an agreement between the international brokers and company insurers on the treatment of the UK insurance premium tax rise (5% to 6% on 4th January 2010). Negotiations with Lloyds insurers are still ongoing.
Insurance Premium Tax Increase 4th January 2011The standard rate of IPT will increase to 6% and the higher rate to 20% with effect from 4 January 2011. Unlike previous rate rises, there are no transitional provisions and despite the combined lobbying efforts of ABI, IUA, Lloyds and LIIBA the Treasury was not prepared to reintroduce such measures. Discussions with insurers have been taking place to mitigate the confusion and uncertainty for clients and reduce the administrative burden for the industry. Agreement on an approach has now been reached with the ABI and IUA and this is reflected in the attached document (included below). (The third bullet part of the guiding principles does not form part of the agreement with the IUA). The ABI and IUA have had today written to their members stating “The attached document reflects what is considered to be the best approach. Whilst this is not mandatory, Members should consider following this approach wherever possible”. These arrangements will inevitably mean that insurers will themselves bear the additional IPT for some risks. To minimise the impact, brokers are asked to cooperate wherever possible by closing risks incepting between now and 3rd January 2011 as promptly as possible. Discussions are continuing with the LMA to extend these arrangements to Lloyd’s underwriters. We are also in contact with XIS to agree appropriate procedures for business closed through Xchanging. Discussions with the Treasury will begin in the New Year to try to ensure that appropriate transitional provisions are in place to cater for any future rate increases. David Hough Chief Executive telephone 020 7280 0150 e-mail enquiries@liiba.co.uk
LIIBA – policies spanning transition – proposed rate change protocolGuiding principles• Where a premium is payable upon commencement of the policy, but the insured pays this sum by instalments, then IPT is normally due up front on the full amount of the premium • However where premiums are payable on a periodic basis (e.g. monthly) for corresponding periods of cover, IPT is due on each premium. • There will be no recourse to LIIBA members and/or their clients if the rate applied using this protocol differs to that ultimately paid to HM Revenue and Customs in accordance with normal “tax point” rules. Premiums payable for policies incepting or renewing on or after 4/1/2011• 6% will apply. Premiums payable for policies incepting or renewing prior to 4/1/2011• 5% will apply. Mid-term adjustments / cancellations resulting in APs or RPsRPs for mid-term adjustments or cancellations • Will be subject to 5% where they relate to policies incepting / renewing prior to 4 January 2011. • Will be subject to 6% where they relate to policies incepting / renewing on or after 4 January 2011. APs • Will be subject to 5% where the effective date of the adjustment is prior to 4 January 2011. • Will be subject to 6% where the effective date of the adjustment is on or after 4 January 2011. • The effective date determined as appropriate: 1. the date any additional risk attaches (e.g. from when a new driver is added to a motor policy), or 2. the date any premium adjustment is presented to underwriters as required in the policy terms (policies with periodically adjustable premiums), or 3. for policy extensions, the date the extension commences (e.g. for a 12 month policy which expires 30 June 2011 and which is extended to run to 31 December 2011, the relevant date would be 1 July 2011). Estimated / retrospectively rated premiums• The position per APs and RPs applies. |
