The Finance Act 1994 Schedule 6A, provides that the higher rate
of IPT will apply to taxable insurance contracts relating to motor
vehicles and domestic appliances where the insurance is arranged
through or provided by a person connected to (for example) a motor
dealer or a retailer of domestic electrical/mechanical appliances
(“connected suppliers of specified goods”). However, as
IPT04905, the higher rate will only
apply where the insurance relates to specified goods provided by
the connected supplier.
Any question of whether a person is connected with another is determined in accordance with section 839 of the Taxes Act 1988. This section is reproduced in IPT11400.
In many cases these “connected” transactions will be regular occurrences or easily identified, and the higher rate should be applied accordingly.
However, there will be some instances where the “connected” transactions are indistinguishable from other transactions. In such cases, HMRC will accept that where the connection is coincidental and the insurance is not provided as part of a systematic scheme to sell insurance to customers of a connected supplier of specified goods, the premium will not be subject to the higher rate.
Therefore, where there are genuine difficulties in identifying connected sales, the higher rate of IPT will only apply where there is a deliberate or systematic attempt:
Where there are genuine difficulties in identifying connected
sales we would not expect insurers or insurance agents connected to
a supplier of specified goods to ask each and every customer where
they made their purchase of these goods, or if and where they
intend to make such a purchase.
The connected persons provisions will not generally require the apportionment of premiums between that part of a premium which is deemed to relate to goods supplied by a “connected” supplier of specified goods and that part which is deemed not to. This is because a premium will usually be treated in its entirety as “connected” (if it is sold as part of a systematic scheme to sell insurance to customers of the “connected” supplier of the specified goods or if its connection is easily identifiable) or it will be treated in its entirety as completely unconnected.