BN 31: Insurance Premium Tax (IPT): amendment to the definition of a premium

Who is likely to be affected?

1. Insurers asserting that certain payments received in respect of taxable insurance contracts do not fall within the IPT definition of "premium".

General description of the measure

2. Legislation will be introduced in Finance Bill 2007 to clarify that the IPT definition of "premium" includes payments received by, or on behalf of, an insurer for a right to require the insurer to provide cover under a taxable contract of insurance.

Operative date

3. The measure will have effect on and after 22 March 2007.

Current law and proposed revisions

4. IPT is charged as an inclusive amount within the premium for a taxable insurance contract. Section 72 of Finance Act 1994 defines "premium" for IPT purposes as any payment received under a contract of insurance and certain specified payments related to it.
5. This measure will insert a new subsection 1B in section 72 to make it clear that the definition in that section includes any payment received in respect of a right to require an insurer to provide, or offer to provide, cover under a taxable contract of insurance.

Further advice

6. If you have any questions about this change, please contact the National Advice Service.