Our stance on the IPT rate change: 1 November 2015
Published: 11 Sep 2015
In the Summer Budget 2015 the Chancellor announced an increase to standard rate of Insurance Premium Tax (IPT) from 6% to 9.5% with effect from 1 November 2015. This will affect the cost of your clients’ private medical insurance policies from this date.
The following information covers how we will be applying this change to your clients’ policies:
Policies incepted or renewed prior to 1 November 2015
• New business and renewals will attract the ‘old’ rate of IPT of 6% as long as the premium is invoiced by 29 February 2016
• Mid-term adjustments (MTA’s) with an effective date prior to 1 November 2015 will also attract the 6% rate of IPT as long as the premium is invoiced by 29 February 2016
• MTA’s with an effective date from 1 November 2015 that result in an increase in premium will have the increment taxed at 9.5%, for example:
o Any new life added resulting in an increase in premium
o Any increase in benefits, such as selecting a policy option
o Large corporate scheme end of year membership adjustments at premium category level
• Any premiums invoiced from 1 March 2016 use the higher rate of 9.5% IPT irrespective of the effective date of the cover
• Where a premium is reduced or refunded, IPT is refunded at the rate already applied to the policy, which can be a blend of between 6% and 9.5%
• Where there is an extension to a policy which does not involve a change in risk, the old rate of 6% will apply, provided that the change is not made deliberately in order to avoid the new rate of IPT.
Policies incepted or renewed on or after 1 November 2015
• The new IPT rate of 9.5% will apply to new business, renewals and MTA’s regardless of when the quote was provided or any rate guarantees
• The new IPT rate of 9.5% will apply to any MTA or cancellation resulting in a refund of premium.
If a client pays monthly, quarterly or bi-annually, provided their Direct Debit agreements are written and agreed prior to 1 November 2015, they will have the 6% IPT rate applied to their premium throughout their policy year. For any mid-term additions after 1 November 2015, the new rate will apply on any additional premium.
The concessionary period: 1 November 2015 to 29 February 2016
The concessionary period applies where an insurer uses the special accounting scheme, and it is designed to give insurers time to make the changes necessary to their internal systems and processes to allow for the change in rate of IPT. For more information on what “the special account scheme” means, please refer to the HMRC website.
The concessionary period affects any premiums that are ‘effective’ prior to 1 November 2015. ‘Effective’ is the date that the insurance cover starts or changes. The lower 6% rate of IPT can be used providing premiums are invoiced by the end of the concessionary period on 29th February 2016.
Any premiums that are invoiced from 1st March 2016 onwards use the higher 9.5% rate regardless.
If you have any questions regarding the IPT rate change please contact your usual Aviva sales consultant.
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