Insurance Premium Tax

[rewc]

The IPT is to increase from 10% to 12% from today. "A spokesman for the Treasury said: "Insurance premium tax is a tax on insurers, not consumers - insurance firms decide whether to pass it on to their customers or not."

Can anyone explain that to me in simple terms as i am trying to understand it?

http://news.sky.com/story/millions-o...-warn-10900...

[ging84]

you could say the exact same thing about VAT

if government were to make a cut in insurance premium tax, you bet you'd see a bunch of politicians urging insurers passing the cut on to consumers

[PurpleMoonlight]

rewc said:

The IPT is to increase from 10% to 12% from today. "A spokesman for the Treasury said: "Insurance premium tax is a tax on insurers, not consumers - insurance firms decide whether to pass it on to their customers or not."

Can anyone explain that to me in simple terms as i am trying to understand it?

http://news.sky.com/story/millions-o...-warn-10900...

Can anyone name a single insurer that does not pass it on?

[del mar]

I would dare to suggest the Treasury spokesman has got it wrong.

I have never heard the suggestion that it was payable by insurers, but they pass it on.

I have never quoted a price inclusive of IPT.

[TwigtheWonderkid]

VAT, IPT and the like has to be paid by the vendor, not the buyer. An insurance company who decide they want £100 for a risk will have to pay the treasury £12. So they charge the customer £112. They could of course charge the customer £100, and pay the £12 themselves. But then they'd only have £88 to cover a risk their actuaries said was worth £100. Hence over all their policyholders and expenses/claims costs, they'd lose money.

And seeing as they are in business, like most businesses, to make money, it would be a bit daft.

[anonymous-user]

It's doubled from 6 to 12 percent since October 2015

The treasury statement is ridiculous.

[98elise]

It's a pathetic statement to make. If you tax the service then it will of course be passed on to the customer.

If you could add a flat rate to any service and it not cost the customer then you will have invented a perpetual money machine.

[TooMany2cvs]

rewc said:

The IPT is to increase from 10% to 12% from today. "A spokesman for the Treasury said: "Insurance premium tax is a tax on insurers, not consumers - insurance firms decide whether to pass it on to their customers or not."

Can anyone explain that to me in simple terms as i am trying to understand it?

Your premium, before tax, is £100.
With 10% IPT, your premium after tax is £110.
With 12% IPT, your premium after tax is £112.
Your insurer could reduce the premium slightly to £98.21 before tax, so that it's still £110 after 12% IPT.

[rewc]

TooMany2cvs said:

Your premium, before tax, is £100.
With 10% IPT, your premium after tax is £110.
With 12% IPT, your premium after tax is £112.
Your insurer could reduce the premium slightly to £98.21 before tax, so that it's still £110 after 12% IPT.

In the example they would receive an extra £1.79 and not the £2 they anticipated. Would that bother them?

Edited by rewc on Thursday 1st June 22:23

[TooMany2cvs]

rewc said:

TooMany2cvs said:

Your premium, before tax, is £100.
With 10% IPT, your premium after tax is £110.
With 12% IPT, your premium after tax is £112.
Your insurer could reduce the premium slightly to £98.21 before tax, so that it's still £110 after 12% IPT.

So how would the treasury be making extra money, which I presume was the reason for raising the tax level?

Because you would still pay £110, but the tax portion of that has gone up from £10 to £11.79.

[corozin]

PurpleMoonlight said:

rewc said:

The IPT is to increase from 10% to 12% from today. "A spokesman for the Treasury said: "Insurance premium tax is a tax on insurers, not consumers - insurance firms decide whether to pass it on to their customers or not."

Can anyone explain that to me in simple terms as i am trying to understand it?

http://news.sky.com/story/millions-o...-warn-10900...

Can anyone name a single insurer that does not pass it on?

Well the whole statement is bks because all insurers are obliged to show it as a sub-total on thier final invoices.

[Kateg28]

I work for an Insurance Broker (major commercial lines not personal lines) and we have had to submit to HMRC full details of all the rateable risks, the amount of premium, the amount of IPT and the Insurers involved. To ensure that HMRC are receiving all they consider themselves due. I was the one responsible for collation of this information (we have reports we can run that I already have set up so it was an easy request).

If they truly think that Insurers can choose if they pass on the IPT, then why do we, as brokers, have that information to give them?

And if the Insurer does not pass on to HMRC then we, as brokers, are guilty of aiding tax evasion and that is a criminal act.

[Willhire89]

desolate said:

It's doubled from 6 to 12 percent since October 2015

It will not stop rising until it is in line with VAT

[TooMany2cvs]

desolate said:

It's doubled from 6 to 12 percent since October 2015

The average fully comp car insurance premium was £462, inc IPT, last year.

That's £420 before IPT.
£445.20 after 6% IPT
£462 after 10% IPT (£16.80 difference)
£470.40 after 12% IPT (£8.40 difference to 10%, £25.20 to 6%)

[TwigtheWonderkid]

TooMany2cvs said:

The average fully comp car insurance premium was £462, inc IPT, last year.

When you consider the people who pay way above that, like £1250 or £1500, there must be literally millions of folk paying £150-£200. Which considering PH is always full of what a rip off insurance is and how the UK system is broken, is pretty good.

But I guess your average Mrs Miggins living in a normal provisional town with her 1.2 eurobox and her max ncb isn't posting on here much.

[Eddie Strohacker]

PurpleMoonlight said:

Can anyone name a single insurer that does not pass it on?

No but I can name several politicians who smile sincerely at you whilst putting their hand in your pocket.

[TooMany2cvs]

TwigtheWonderkid said:

When you consider the people who pay way above that, like £1250 or £1500, there must be literally millions of folk paying £150-£200. Which considering PH is always full of what a rip off insurance is and how the UK system is broken, is pretty good.

But I guess your average Mrs Miggins living in a normal provisional town with her 1.2 eurobox and her max ncb isn't posting on here much.

The most expensive of the four policies I currently have is £150 (my only NCB is 2yrs). Average is about £100.

[Eddie Strohacker]

TwigtheWonderkid said:

When you consider the people who pay way above that, like £1250 or £1500, there must be literally millions of folk paying £150-£200. Which considering PH is always full of what a rip off insurance is and how the UK system is broken, is pretty good.

But I guess your average Mrs Miggins living in a normal provisional town with her 1.2 eurobox and her max ncb isn't posting on here much.

Which neatly overlooks the iniquity of penalisation by IPT for being stupid enough to be young or live in an insalubrious postcode. It's regressive in the same way that say, gas meter keys are, since they act on inelastic demand & therefore penalise penalise essential use rather than reduce demand such as tax on cigarettes for example.

Handy way for successive chancellors to cover gaps, st way to treat the hard up.

[Ninja59]

IPT and Discount Rate have had huge impacts on premiums. But yes IPT really is a stealth tax as it not obvious unlike fuel duty going up.....

[anonymous-user]

The discount rate is really sending shock waves through the industry.

I was with a senior underwriter the other week and he had one claim that he had to change the reserve from 6 million to 16.5 million.


That is an unusually large claim but illustrate the impact on any claim involving long term injuries (and a completely separate issue to minor whiplash claims and fraud)