IPT – apportioning premiums and the de minimis

By Tolley

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

  • IPT – apportioning premiums and the de minimis
  • Apportioning premiums
  • De minimis – requirements
  • Registration requirements
  • Submitting IPT returns
  • Points to consider

This guidance note provides an overview of how to apportion contracts and using the de minimis provisions under which a business can avoid the requirement to account for IPT if they meet the conditions outlined below. This note should be read in conjunction with the following guidance notes:

FA 1994, ss 48–74, Sch 6A, Sch 7 and Sch 7A; Insurance Premium Tax Regulations 1994, SI 1994/1774; Notice IPT 1 – a general guide to IPT ; IPT05800; 2006/112/EC , Article 401; De Voil Indirect Tax Service V18.105 (subscription sensitive)
  • Insurance Premium Tax (IPT) – introduction
  • IPT – exemptions and risk management
  • IPT – supplies liable to the higher rate
  • IPT – Registration requirements
  • IPT – accounting requirements
  • IPT – returns, payments and penalties
Apportioning premiums

If an insurer writes a policy that has elements of risk which are liable to IPT at that standard and / or higher rate and / or are exempt from IPT then it will be required to calculate the amount of the premium which relates to each element of the risk. Please see the IPT – exemptions and risk management and IPT – supplies liable to the higher rate guidance notes for more information.

Please note that it is not possible to apportion the fees levied by a taxable intermediary.

Methods of apportionment

HMRC has produced the following table which provides examples of the methods that could be used by an insurer to apportion the premium between the different types of risk. The business will need to be able to provide satisfactory evidence to HMRC that the apportionment used has given a ‘just and reasonable’ result. The method of apportionment used must have some relationship with

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