Pre-Budget Report – Insurance Premium Tax
HMRC are to block an avoidance scheme used by certain businesses that split the premium otherwise payable under insurance contracts. The new legislation will take effect for payments made on or after 9 December 2009.
The legislation seeks to block the situation whereby individuals are charged an ‘administration fee’ under a separate contract thereby reducing the amount of insurance premium tax payable.
The contracts affected by this change are:
- Contracts for services that would usually form part of the insurance contractor
- Contracts where the insured is required to enter into both contracts together, or would be unlikely not to.
Separate charges for amendments to the insurance contract or for paying for insurance by credit/debit card or by instalments are not affected by the measure.