WHAT IS INSURANCE PREMIUM TAX?
Have you ever wondered if your insurance premium includes VAT? Maybe it’s not something you’ve considered before. Actually, insurance is a service which does NOT include VAT as it is subject to a different type of tax. This is called the Insurance Premium Tax or IPT.
What is the IPT?
The IPT is a form of tax which applies particularly to general insurance premiums. This affects most types of insurance including both commercial and personal policies.
How Much Is IPT?
There have been concerns over the past few years that the IPT has seen regular increases, with the most recent being in June 2017. The IPT rate currently stands at 12%. For certain covers including travel insurance, this amount jumps up to 20%. Most insurance providers include the cost of IPT in their final quote, so the amount you see has the IPT included.
How Does IPT Compare To VAT?
The standard IPT figure of 12% stands at 8% less than the standard VAT rate of 20%.
Can I Claim Back My IPT?
Unlike VAT, you are unable to claim back your Insurance Premium Tax. Generally, you will only be able to claim back IPT if it has been paid in error.
Are There Any Exceptions?
In accordance with GOV.UK guidance, there are a number of insurances which are exempt from IPT. These include life insurance, commercial ships and aircraft and goods in international transit.
If you’re unsure about how VAT or IPT will affect your insurance, the best thing to do is check with your insurer or the HMRC directly.
If you’re concerned about the rising cost of your cover, get in touch with FSB Insurance Service. We scour the market to find the most competitive policies based on your businesses individual circumstances.