Insurance Premium Tax (United Kingdom)

Insurance Premium Tax (IPT) is a type of indirect tax levied on general insurance premiums in the United Kingdom.
Overview.
The UK government introduced the Insurance Premium Tax to raise revenue from the insurance sector, which was viewed as being under-taxed, and not subject to Value Added Tax. The main EU legislation regarding VAT (Council Directive 2006/112/EC) states that insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents, are exempt from VAT.
The Insurance Premium Tax was announced by Kenneth Clarke in the November 1993 budget and introduced with the Finance Act 1994 which received Royal Assent on 3 May 1994. IPT is under the care and management of HM Revenue & Customs.
IPT raised £2.3 billion in the fiscal year 2009/10.
Law.
The main law relating to IPT includes:
Rates.
There are two different insurance premium tax rates:
Insurers providing taxable insurance are required to register and account for IPT, as must intermediaries who sell insurance subject to the higher rate of IPT and charge a separate insurance-related fee on top of the premium itself.
The Chancellor George Osborne stated in the 2016 spring budget that the standard rate of IPT would increase from 9.5% to 10% from 1 October 2016.
In the 2016 autumn statement the new Chancellor Philip Hammond stated that the standard rate would increase from 10% to 12% from 1 June 2017.
Historic rates.
From 1 October 1994 to 31 March 1997, a single rate of 2.5% was charged. From 1 April 1997, two rates were charged:
Exemptions.
All types of insurance risk located in the UK are taxable unless they are specifically exempted. Exemptions from this tax include:
IPT registration.
Businesses are required to register for IPT if they are:
Businesses must be registered from the date they receive (or someone receives on their behalf) their first taxable premium. Businesses must inform HM Revenue & Customs within 30 days of forming the intention of receiving taxable premiums as the insurer.