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Recent Updates: Increase in UK IPT Rates

The standard rate of IPT in the UK is being increased to 9.5% (from 6%) with effect from 1 November 2015. Legislation will be introduced in the Summer Finance Bill 2015 to provide for the rate increase.

 

  • For insurers using the Cash Received method, the new rates will have effect for premiums (received under taxable insurance contracts) on or after 1 November 2015.
  • For insurers using the Special Accounting Scheme, there will be a 4 month concessionary period from 1 November 2015 to 29 February 2016, during which premiums received under taxable insurance contracts entered into before 1 November 2015 will continue to be liable to IPT at 6%. From 1 March 2016, all premiums received by insurers will be taxed at the new rate of 9.5%, regardless of when the policy was entered into. 
  • Anti Forestalling Provisions are already in place to prevent tax avoidance. These provisions apply to both accounting schemes and in relation to defined advance payments and extended cover.

 

Insurers with UK business will need to review their systems to ensure that the new rates are applied correctly.  

 

The KPMG view

 

  • The standard rated rise is not unexpected.
  • The old 6% rate was one of the lowest of all IPT rates across Europe.
  • Further rate rises cannot be ruled out, given the 9.5% rate is marginally lower than the average European IPT rate.
  • This rise will inevitably result in a premium increase for insureds, with the consequence being that some may fail to take out or renew essential, and often, compulsory insurances.
  • It is estimated that the increase in the IPT rates will raise in excess of £1.5 billion a year.

 

How KPMG can help

Our audit professionals, tax consultants, actuaries and advisory consultants work to deliver long-lasting value. Our global insurance practice covers 80 global financial centres and provides financial advisory and tax services to many of the world's leading insurers. Our multinational team of professionals provide a full service to all life, non life and reinsurance companies.

 

Actuarial

Our dedicated Actuarial practice combines technical knowledge and rigorous processes with wide-ranging commercial and market experience to provide progressive, high quality and flexible advice.  We provide services in a range of areas, including risk management, regulatory, tax, advisory and accounting lines. We are also involved in both professional and industry bodies and take an active role in pursuing regulatory, accounting and tax issues affecting the industry.

 

Click here to read more about our actuarial services.

 

Solvency II

Solvency II is intended to create a framework within which European insurance and reinsurance regulation operates. Its introduction is a highly complex and challenging process and one in which KPMG member firms have been heavily involved to date.

 

The delays to Solvency II present insurers with an opportunity to step back and think about how they can fully embed risk management within the business.

Insurance contacts

liam lynch, partner

Liam Lynch

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Partner & Head of Insurance

liam.lynch@kpmg.ie

+353 1 410 1734

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hubert crehan, partner

Hubert Crehan

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Partner & Head of Financial Services Audit

hubert.crehan@kpmg.ie

+353 1 410 2629

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