Insurance Premium Tax (IPT) due to rise in 2011

The standard rate of IPT will increase to six percent and the higher rate to 20 percent. on the 4 January 2011. Certain types of risk are exempt, including life assurance business, reinsurance and ships and aircraft. IPT due is likely to be recharged to the policyholder – like VAT it is borne by the policyholder but collected by the insurer. Unlike VAT, however, it is charged only at the final (retail) stage. Insurers may account for the tax on a ‘cash receipt’ basis or a ‘written premium’ basis. Read this The following insurance contracts are exempt from IPT:

• reinsurance;
• life insurance, permanent health insurance and all other “long term” insurance except medical insurance;
• commercial aircraft and some associated liabilities;
• commercial ships and some associated liabilities;
• lifeboats and lifeboat equipment;
• foreign or international railway rolling stock and some associated liabilities;
• export finance;
• commercial goods in international transit;
• block insurance policy held by Motability which covers all disabled drivers who lease their cars through the scheme;
• risks located outside the UK; and  the Channel Tunnel.