V18.127 The tax point

V18.127 The tax point

When the introduction of IPT was announced the original plan was to use the date the premium is received by the insurer (or any intermediary) as the tax point. This method still applies but many insurers find it difficult to administer, particularly where the insured pays the premium to an intermediary. Regulations1 under FA 1994, s 68 therefore allow the use of an alternative method known as the special accounting scheme to account for tax.

If the insurer uses the special accounting scheme the premium is treated as received on the premium written date2 and not on the date of receipt3. The premium written date is the date the insurer makes an entry in his accounts showing the premium as due to him4. The insurer is required to account for tax on premiums where the premium written date falls into the accounting period5. This provision applies even if the premium, or any part of it, is not received by the insurer for whatever reason including the termination or the non-effecting of the insurance

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