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Daily Insurance Industry News
Wednesday 15th of August 2018
September 3, 2010

Deloitte flags up IPT increase preparations

by Gill Montia

Story link: Deloitte flags up IPT increase preparations

Deloitte is reminding insurers that there are only four months left before the UK’s standard rate of insurance premium tax (IPT) increases to 6%.

The accountancy firm suggests that preparations should already be underway, given this is the first rate change for 11 years.

According to the company’s indirect tax director, David Fownes: “There is a risk of reporting errors if key transition requirements are not addressed and resolved.”

He adds: “Under the recently introduced penalty regime for IPT, HMRC can now penalise careless errors at up to 30% of the amount of tax due.”

By way of assistance, Deloitte has identified four key issues for insurers to consider in the lead up to the rate increase, as follows:

Aligning the interaction of the special accounting scheme with the rate rise and ascertaining the correct tax points, and applicable rate, for all business written and premiums received;

Managing the broker network and/or other distribution methods to ensure consistency of approach across all premium income streams;

Monitoring any developments regarding transitional arrangements and then applying them if and when they are announced; and

Ensuring that underwriting systems and the audit trail to the IPT return are prepared to cope with the rate change.

Mr Fownes continues: “HMRC are yet to announce any transitional arrangements that would make it easier for the industry to cope with the change, and may not do so even though there were such arrangements on previous rate changes.”

He cautions: “This will particularly affect those insurers who use the special accounting scheme for IPT accounting and who have policies that incept well before the premiums are booked.”

 

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