As you may well be aware, the government has announced an increase in the rate of IPT (Insurance Premium Tax) from 10% to 12% as of 01st June 2017.
WHO COLLECTS THIS TAX?
HMRC will collect this tax from your insurers. However, they have the right to audit and verify your declarations and may decide to do so as part of any audits or checks they perform on your company. With the rate of IPT increasing, it is likely that HMRC will be highly vigilant in checking this tax is being correctly charged, declared and collected.
As a result of this insurers will want to ensure that correct tax revenues are collected on relevant charges made by your company. This means it is imperative that you tell Reason Global about the IPT you have collected with insurance charges made to your customers.
Where your customer charges are all subject to VAT (i.e. you work on a Standard Liability, Insured Remover or for self storage on an Insured Operator basis) the change in the rate of IPT does not impact on any charges you make to your customers.
So what does this mean for you and your clients?
CHARGES TO YOUR CUSTOMER
Where you offer insurance to your customers and make a charge, that charge is subject to IPT, so you need to allow for the increased rate as the cover you arrange for each of your customers constitutes a separate insurance contract. The rules applying to the increased rate are as follows:
The above rules apply regardless of the renewal date of your own insurance policy.
This will mean you need to discuss the changes required with your relevant software and systems suppliers as soon as possible to be ready for the 01st June 2017 date.
For clients who use our marine insurance web-based portal, the new charges will be automatically applied from 01st June 2017 and no action will be required by you for shipments booked through this channel. However, any customer correspondence you create will need to reflect the new 12% rate.
INSURANCE POLICY RENEWALS
All premiums on any insurance policy incepted or renewed from 01st June 2017 will be subject to the new 12% rate. This applies across all insurance policies you hold.
However, any additional premiums processed on policies incepted or renewed before 01st June 2017 will be subject to the 10% rate.
IPT ADJUSTMENTS
As part of the change in the rate of IPT as of 01st June 2017, HMRC have set a timescale for insurers submitting tax returns at the 10% rate. We will ask you for an IPT declaration at renewal of your policy as normal. However, we will also need an additional declaration of IPT charged at the 10% rate up to 01st June 2017 where required.
We would appreciate you sending this to us at our very earliest convenience. As there are strict timescales imposed by HMRC for these to be processed at the 10% rate if your declaration reaches us after 01st April 2018 you may well be subject to the new rate of 12% on all IPT charged to your customers’.
We are unable to guarantee that we will individually contact all clients in time regarding this mid-term policy adjustment. Therefore, please take this communication as instruction to prepare your IPT declaration and send it to us by the date advised. Prompt submission of declarations are imperative to ensure the new rate of 12% is not applied to charges made to your customers prior to 01st June 2017.
Please email or call your usual account manager at Reason Global should you require further information.
