Insurance Premium Tax (IPT) ― introduction

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Insurance Premium Tax (IPT) ― introduction
  • What is IPT?
  • Change in rate ― transitional arrangements
  • Taxable insurance contracts
  • Supplies that are exempt from IPT
  • Supplies liable to higher rate of IPT
  • Intermediaries

This note should be read in conjunction with the following guidance notes:

  • IPT ― exemptions and risk management
  • IPT ― apportioning premiums and the de minimis
  • IPT ― registration requirements
  • IPT ― accounting requirements
  • IPT ― returns, payments and penalties

FA 1994, ss 48–74, Schs 6A, 7, 7A; Insurance Premium Tax Regulations 1994, SI 1994/1774; HMRC Notice IPT1 ; IPT03000; 2006/112/EC , Article 401; Financial Services and Markets Act 2000 (subscription sensitive); Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544; Financial Services and Markets Act 2000 (Law applicable to Contracts of Insurance) Regulations 2001, SI 2001/2635 (subscription sensitive); De Voil Indirect Tax Service V18.101 (subscription sensitive)

What is IPT?

IPT is a tax that is collected on premiums payable in respect of taxable contracts of insurance. IPT is not a turnover tax and is therefore not prohibited under 2006/112/EC , Article 33. This was confirmed in the CJEU decision in Gil. See Gil Insurance and others (C-308/01 ).

IPT is levied at two different rates depending on the type of taxable insurance supplied:

  • 12% from 1 June 2017
  • 20% higher rate from 4 January 2011 (see the IPT ― supplies liable to the higher rate guidance note)

The previous rates of IPT were:

Standard rateHigher rate

More on Insurance premium tax: