Commentary

V18.116 Change in rate of tax—anti-forestalling provisions

Part V18 Insurance Premium Tax

V18.116 Change in rate of tax—anti-forestalling provisions

V18.116 Change in rate of tax—anti-forestalling provisions

FA 1994, ss 67A–67C, which were inserted by FA 1997, s 29(1), contain provisions to prevent an attempt to avoid a new rate of tax by forestalling through pre-payment or an extension of the term of the contract. This applies to changes in rate of tax before 1 June 2017.

If an increase in the rate of tax from a specified date is announced1 and:

  1.  

    •     a premium under a contract of insurance is received by the insurer on or after the date of the announcement but before the date of change, and

  2.  

    •     the period of cover provided by the contract begins on or after the date of change, the premium shall be taken to be received on the date of the change of rate2

If an insurance contract3:

  1.  

    •     provides cover for an extended period ending after the first anniversary of the change of rate, and

  2.  

    •     the premium is received by the insurer on or after the date of the announcement but before the rate of change,

then the proportion of the premium providing cover after the first anniversary of the date of the change of rate shall be taken to be a separate premium received on the date of the rate change and therefore subject to the increased rate of tax4. The proportion of the premium providing cover to the first

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