Insurance premium tax update
A recent High Court decision has forced HMRC to revise their guidance re the IPT liability on arrangement and administration fees charged by insurers.
The High Court overturned the Tribunal’s earlier decision and found against HMRC that a contract between an insured homeowner and the insurer who arranged domestic plumbing and electrical breakdown insurance was not subject to IPT.
HMRC have decided not to appeal the decision of the High Court and is currently processing claims for IPT overpaid by businesses using arrangements broadly similar to those in the recent High Court case. HMRC’s view remains that such arrangements are artificial and is seeking to close the loophole which resulted in a win for the taxpayer in this case.
HMRC will be having informal consultations with the Association of British Insurers (ABI) and other insurance representatives to ensure that the proposed changes to IPT legislation are properly targeted and implemented.