The trade association that represents insurtech start-ups in the UK has released a strongly worded plea ahead of today’s (March 03) Budget.
In a joint statement, Insurtech UK co-chairs James York and Luisa Barile said: “There are reports that the Chancellor may be considering a rise in IPT (Insurance Premium Tax) at this Budget, as part of an initial plan of tax rises to help rebuild the public finances due to COVID-19. We would firstly urge caution in that matter at a time when the entire economy needs some breathing space to get back on its feet.
“This would only add an additional cost burden to customers. However, if action is taken, then we call upon the Chancellor to end the anomaly within the tax regime facing insurtech intermediaries in the UK, where they cannot reclaim any VAT (value-added tax) on incurred costs.”
The representative body, which has brought up the issue with both HM Treasury and HM Revenue & Customs (HMRC) in meetings and through consultation responses, believes a “fairer” VAT regime would enable insurtechs to scale quicker – and, in turn, contribute more to the economy – and encourage further investment.
It was highlighted that insurtechs operating in the UK have managed to attract in excess of £1.6 billion in funding since 2015. In the association’s view, the sum definitely would have been higher under more favourable tax arrangements. Additionally, it was pointed out that other tech sectors in the country do not share the same fate when it comes to VAT.
“As technology-intensive businesses,” stated the co-chairs, “a larger proportion of costs for insurtechs are liable for VAT, acting as a disincentive for investors. While the insurtech sector has seen considerable growth in the UK in recent years (even through the pandemic), VAT costs undoubtably holds it back.
“This is something that Insurtech UK has consistently raised with HM Treasury and HMRC over the past 18 months. An end to this regime would allow the sector to grow faster, bringing wider benefits to both consumers and the broader economy.”
Insurtech UK said it is calling upon HM Treasury to consider how it can use its new freedoms outside of the European Union to create what the trade body described as a “more innovation-friendly landscape” for insurtech intermediaries.
“We believe resolving the current VAT issue would be in line with HM Treasury’s stated objective of promoting a ‘vibrant, innovative, and internationally competitive insurance sector’ as well as aligning with PRA’s (Prudential Regulation Authority) goal of ‘promoting developments in driving further digital insurance and innovation’,” asserted Insurtech UK.