IPT Rate Changes 1st June 2017...

   

As you may be aware, there will be an increase to the standard rate of UK Insurance Premium Tax (IPT) from 10% to 12% effective at the beginning of June 2017.  We wanted to provide some practical guidance on these changes to ensure there were no issues arising for all parties involved.

The key changes are as follows:

  • With effect from the 1st June 2017 the standard rate of UK IPT will increase from 10% to 12% for all policies incepting on or after that date.
  • There are transitional arrangements that allow certain business to continue to be processed at the old rate (10%)
  • Business processed in relation to cover that incepted prior to 1st June 2017 may be taxed at the 10% rate if it is processed before 1st June 2018.  Certain mid-term adjustments may also be taxed at the 10% rate if it is processed before 1 June 2018.
  • An additional premium processed in relation to a risk that commenced prior to 1 June 2017 may be taxed at the old rate (10%) rate if they are processed before 1 June 2018. 
  • Where a new risk attaches to an existing policy then the new rate of IPT (12%) should apply if the new risk attaches on or after 1 June 2017.
  • Return premiums must be processed using the tax rate that was applied to the original transaction being adjusted irrespective of inception date or process date.
  • All business processed on or after the 1 June 2018, apart from return premiums, will attract the new rate of IPT (12%) irrespective of the inception date.

Summary of rates to be applied:

Settlement Due to XL Catlin (Angel)
Type Policy Inception Before 01/06/2017 01/06/2017 - 31/05/2018 On / After 01/06/2018
Any > 01/06/2017 12% 12% 12%
New Business < 01/06/2017 10% 10% 12%
Renewal < 01/06/2017 10% 10% 12%
MTA AP < 01/06/2017 10% 10% 12%
MTA RP < 01/06/2017 10% 10% 10%


*RP should be taxed in the same way the premium it relates to was – if this cannot be identified with certainty the prudent approach is to apply the lower rate