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Solicitors - Important Notice in ATE Policies : Change to the rate of IPT

08 May 2017

 

The Rate Change


You will be aware of the latest change in the standard rate of insurance premium tax (IPT) which was presented in the 23rd November 2016 Autumn Budget Statement. Philip Hammond announced a 2.0% increase of IPT paid on premiums which are taxed at the standard rate. The rate therefore increases from 10.0 % to 12.0% effective from 1st June 2017.  


Effective date used to determine rate of IPT

ARAG submits accounts to its Underwriters based on the effective date i.e. the tax point. This is determined by the date upon which cover provided by the insurance policy begins i.e. inception date (including mid-term adjustment date). 


Transitional Period

From the effective date of the rate change, i.e. 1st June 2017, HMRC rules provide for a transitional period which will end on 31st May 2018. 

That transitional period was designed to accommodate arrangements in place which have inherent delays built in e.g. the submission of information and premiums following the conclusion of the case. Whilst the transitional period allows a limited window to deliver details of polices, ARAG's Solicitors should note that if premiums due on policies incepted pre-1st of June 2017 are not booked at ARAG by 28th April 2018, then the Agents will be liable to 12.0% IPT. 

This 28th April 2018 final delivery date is necessary because ARAG, in turn, has to forward covers by bordereaux to Underwriters in sufficient time to allow them to process the premiums to meet the 31st May 2018 deadline.


What this means in practice is

- all policies with an inception date on or after 1st June 2017 will be liable to 12.0% IPT

- all policies with an inception date before 1st June 2017 will be liable to 10.0% IPT provided the premium is received by ARAG by 28th April 2018

- all premiums received by ARAG on or after 28th April 2018 will be liable to 12.0% IPT irrespective of the rate received from policyholder or the inception date of the policy

- any additional premiums due as a result of Mid Term Adjustments (e.g. increases in the policy limit of indemnity) arising before 1st June 2017 will be liable to IPT at 10.0% (so long as it is received by ARAG by 28th April 2018)

- any additional premiums due as a result of Mid Term Adjustments (e.g. increases in the policy limit of indemnity) arising on or after 1st June 2017 but before 28th April 2018 will be liable to IPT at 10.0% provided the underlying original policy was in force prior to 1st June 2017 and these additional premiums are received by ARAG prior to 28th April 2018.

- any additional premiums due as a result of Mid Term Adjustments (e.g. increases in the policy limit of indemnity) arising on or after 1st June 2017 where the original policy has an inception date falling on or after 1st June 2017 will be liable to IPT at 12.0%

- any premium refunds will attract IPT credit according to the rate of tax appropriate to the initial or additional premiums  

 

If you have any questions or concerns, please contact your business relationship manager who will be happy to assist. If you prefer you can also refer any questions to Hannah Woolley by email at hannah.woolley@arag.co.uk or call at: 0117 307 2293.  

--

Robert Moreton FCMA
CFO & Company Secretary
ARAG plc.

 

Registered in England No. 02585818. ARAG plc is authorised and regulated by

the Financial Conduct Authority, Firm No. 452369

Solicitors - Important Notice: Change to the rate of IPT

08 October 2015


Implications and ARAG's requirements



The Rate Change

You will be aware of the latest change in the standard rate of insurance premium tax (IPT) which was announced in the Summer (8 July) 2015 Budget. George Osbourne announced an increase from 6% to 9.5%.
 
Effective date used to determine rate of IPT

ARAG remits to its Underwriters on the basis of the effective date i.e. the tax point. This is determined by the date upon which the policy concludes which is the date your client obtains successful judgment or reaches agreement with the opponent to settle their claim in their favour (whichever happens sooner). Therefore any case concluding on or after 1st November will be liable to pay 9.5% IPT.


Transitional Period

The rate change will be effective from 1 November 2015 and the rules provide for a transitional period which will end on 29 February 2016. That transitional period was designed to accommodate arrangements in place which have inherent delays built in e.g. the submission of premiums following the conclusion of the case.

Whilst the transitional period allows a limited window to deliver details of polices, ARAG's Solicitors should note that if premiums due on cases concluded pre 1st November 2015 are not booked by ARAG by 31 January 2016, then they will be liable for the full 9.5% IPT.
This 31 January 2016 final delivery date is necessary because ARAG, in turn, has to forward covers by bordereaux to Underwriters in sufficient time to allow them to process the premiums to meet the 29 February deadline.
 
In Summary:

       - Any premium that we receive before 31/1/16 for a case that concludes before 1st November 2015 will attract IPT at 6%.
       - Any premium we receive where the case concludes on or after 1/11/15 will attract the new IPT rate of 9.5%.
       - Any premium we receive after 31/1/16 irrespective of when the case concludes will attract the new IPT rate of 9.5%
 

As a result we will be shortly reissuing the policy schedules to reflect the new premium should the case conclude after 1st November.
If you have any questions or concerns please contact your business relationship manager who will be happy to assist.
 
--
Robert Moreton FCMA
CFO & Company Secretary
ARAG plc.

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