Insurance Premium Tax(IPT) was first introduced in 1994: it’s an indirect tax applied by the government on all general insurance premiums. Unlike VAT, companies are not able to claim this back from the HMRC.
In recent years insurance premiums have, on the whole, been falling, which has resulted in a reduction of income for the Exchequer. The Chancellor therefore decided to increase the IPT rate from 6% to 9.5% from 1st November 2015. In addition a flood levy has also been applied from 1st October 2016 raising the tax further to 10%.
This year has seen the largest levels of increase since the tax’s introduction which has had a significant impact on companies’ insurance costs in a time when business is seeing increased inflation due to the impact of currency fluctuations following Brexit.
Whilst this is a tax and can’t be avoided, the way a broker is remunerated can have a small impact on this cost. Insurance broking fees do not attract IPT or VAT and as such it can be worth considering how your broker is paid.
The fee based model won’t be right for everyone however it could be worth having a conversation with your Account Manager to see if it can work for you.
You can contact us to discuss further on either 01302 341 344 or 0114 243 9914.