VATINS8110 - VAT and Insurance Premium Tax (IPT): What is IPT?: Definition of “premium”
Under IPT legislation, the definition of an insurance premium is given at section 72(1) Finance Act 1994:
72(1): A premium is any payment received under the contract by the insurer, and in particular includes any payment wholly or partly referable to-
- a risk,
- costs of administration,
- commission, (this means that all payments to an intermediary may be treated as if they are part of the premium),
- any facility for paying in instalments or making deferred payment (whether or not payment for the facility is called interest), or
An insurer is expected to account for IPT on the amount of the premium due under the contract of insurance. The amount of the premium includes IPT and any commission paid to intermediaries.
However, where an amount in connection with a standard rated contact of insurance (such as, an arrangement fee) is charged under a separate contract, and the: existence of the separate contract; and amount of the fee are disclosed in writing to the insured, no IPT will be due on that amount.