Should You Be Paying This Tax?
Have you ever heard of Insurance Premium Tax? I doubt that many of us have although it may be that you’re paying it even though you shouldn’t be.
Insurance Premium Tax (IPT) is a tax on the premium you pay for most general insurance policies where the risk is located in the UK. It applies to general insurance policies including motor, household, medical (including long-term cover), income replacement, travel and other protection cover. Life insurance policies and long-term plans with an investment element do not attract IPT.
There are two rates of IPT – a standard rate of 6% and a higher rate of 20%. The higher rate applies to amongst other things, all travel insurance and also to insurance policies purchased as add-ons to other products, for example on an extended warranty when you buy a television, you will pay IPT at the higher rate.
But the tax is not chargeable where the policy holder is habitually resident in the Isle of Man, or the risk being insured against is in the Isle of Man (e.g. a building in the Island, or a car registered in the Island).
Some UK insurance companies supplying cover to Island residents understand that the tax is not chargeable and automatically remove it from quotes. However experience tells us that this is not always the case. We are aware of a number of cases where the tax has been charged and only through the persistence of the customer has the tax been refunded.
The Advice Centre Manager Andrea Tabb asks consumers to confirm with their insurance companies, brokers, electrical retailers or travel companies before they take out insurance with UK companies that the tax will not be charged. “It will come as a surprise to most people that they may be paying this tax” she said. “It may be that companies do not realise that the tax is not chargeable to Isle of Man residents. Always check before handing over your money. You will find more information on the HM Revenue and Customs website www.hmrc.gov.uk or by calling its Helpline on 0845 0109000 for further advice.”