Insurance Premium Tax case and admin fees
The High Court has passed judgment as to whether arrangement and administration fees are subject to Insurance Premium Tax (IPT). The High Court found for the taxpayer and, in so doing, overturned the Tribunal’s earlier decision.
In this case the appellant acted as an insurance intermediary by setting up ‘assistance insurance’. For example, plumbing and draining assistance where an insured homeowner has a drainage emergency. The appellant’s role included locating and agreeing terms with insurers and offering an insurance backed product to the public.
The main question in this case was, when a member of the public signed up for ‘assistance insurance’ were there actually two separate contracts? That is, one between the homeowner and the Appellant and a separate contract between the homeowner and the Insurance company? This was the way the marketing material to the homeowner was written but the courts needed to rule on whether this was ‘separate’ within the meaning of section 72(1A)(b) of the 1994 Act. Ultimately the court needed to decide if the fee retained by the Appellant was subject to IPT.
The High Court, in finding in favour of the Appellant, found their arguments ‘wholly persuasive’ and agreed that there were two separate contracts. The fee retained by the Appellant was therefore not subject to IPT.