HM Revenue & Customs (HMRC), which held an Insurance Premium Tax (IPT) consultation from November 2020 to February 2021, has published a summary of the responses, as well as the taxman’s next steps.
According to HMRC, it received responses from the Association of British Insurers, Aviva, AXA, BGL Group, the British Insurance Brokers’ Association (BIBA), By Miles, Create Solutions, Direct Line, EY, Hastings, London & International Insurance Brokers’ Association, Lloyd’s, RSM, and Zurich.
In the consultation, options were proposed to potentially amend the operation of IPT. HMRC sought to address the issues of unregistered insurers who fail to fulfil IPT obligations; the use of avoidance structures by some industry stakeholders; and whether the administration of IPT could be improved.
On the proposed option to make insurance brokers jointly and severally liable for IPT, the taxman revealed: “Almost all who answered were opposed to the introduction of joint and several liability in this area, some very strongly opposed.
“One respondent noted that this would break with HMRC’s long established practice of making insurers solely liable for IPT, leading to a confusion of responsibilities. Another felt that this would make it less likely that overseas insurers would register for IPT, increasing the administrative burden on brokers.”
In response, HMRC said it will not be taking forward this option at this time.
Among the other options is a Code of Conduct to be entered into by insurance brokers in which they would commit to report unregistered insurers. This option will be explored further.
“The responses to this chapter of the consultation were broadly in favour of a Code of Conduct to be entered into by the UK brokerage industry,” said HMRC. “The government will engage with the industry to establish the outline of how such a code might be formulated and how it might effectively be implemented.
“Whether a code is taken forward, and in what form, will depend on the outcome of this engagement with industry, as it is essential that the code provides value for both the industry and HMRC.”
The consultation also touched on certain administration fees and whether to make them liable to IPT. The ‘avoidance structures’ chapter proposed options to discourage the use of certain corporate structures which may be used to lower an insurer’s IPT liability.
On the subject, HMRC stated: “The responses to this chapter set out strong advantages and disadvantages to the options proposed in the consultation document. On reviewing the responses, neither of the proposed options provide a proportionate solution to the issue this chapter sought to address. As such, neither option will be taken forward at this time.”
That means, at this point, IPT will not be extended to administration fees charged on all non-commercial insurance transactions. Administration fees charged by a party connected to the underwriter will also not be made liable to IPT.
The taxman stressed, though: “The government considers avoidance to be unacceptable and will continue to monitor the level of the use of corporate structures to reduce liability to IPT. It may therefore be appropriate for these options to be revisited at a later date, or further options considered.”
While there were no legislative policy changes announced, HMRC said further updates will follow subject to the outcome of ongoing discussions with the insurance industry.
Reacting on LinkedIn, BIBA declared: “Great news! [Compliance & training head] David Sparkes’ powers of persuasion helped BIBA to do what we do – get better outcomes for our members. IPT not to be levied on broker fees and won’t be liable for unpaid IPT!”
Meanwhile the government said it is grateful to all those who took time to respond.