Broking breakfast briefing

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Cassandra Hawkins
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1 Broking breakfast briefing IPT and VAT update for broker accounts staff 12 November 2010

2 IPT and VAT for broker accounts staff Introduction to IPT principles What constitutes an insurance contract? UK risks Higher rate/exempt contracts Premium Section 52A fees of taxable intermediaries Commissions

3 IPT and VAT for broker accounts staff (continued) IPT premium splitting New approach by HMRC Compliance throughout Europe IPT rate increase VAT update: rate increase partial exemption special methods outsourcing insurance services Questions and answers

4 Insurance Premium Tax Insurance Rates UK Risk Standard 5% Higher 17.5% Exempt

5 Insurance Sec 73(1) FA 94 Sec 70 FA 94..provision of insurance every contract of insurance is a taxable insurance contract 1) Premium 2) Indemnified against a loss from an uncertain event 3) Insurable interest Offer, acceptance and consideration WARRANTIES?

6 UK risks Para 8 Sch 7A FSMA 2000 SI 2001/2635 Reg 2(2) Overseas risks exempt Registered in UK Located in UK

7 UK risks (continued) Travel Taken out where? Telephone call made Postal application was sent You booked it over the internet 4 months max if taken out in UK Habitual residence in UK where taken out, (generally 1 year) Location of establishment in UK when taken out Other risks

8 Rates Standard 5% Higher 17.5% Exempt Default Sch 6A Sch 7A Motor car insurance Domestic appliance insurance Travel insurance

9 Rates (continued) Reinsurance Long term business Motor vehicles for handicapped people Commercial ships Lifeboats Commercial aircraft Risks outside the UK Foreign/international rolling stock

10 Rates (continued) Channel tunnel Goods in foreign/international transit Credit Exchange losses Financial facilities

11 Premiums Risk Administration costs Section 72(1A) Commission Facility for paying in instalments - eg interest Tax Right to require other insurer to provide cover - Under Section 52A OR - Charged under a separate contract and identified in writing Ignore Commission

12 Section 52A Fees of taxable intermediaries Higher rate contracts Liability of fee Liability to register and account for IPT Effect of Section 52A

13 Commissions Insurance company Broker Household contents insurance escapes IPT 1) Not Sec 52A 2) Is charged under a separate contract

14 Commissions (continued) Does not appear to relate to services provided by the broker to the customer Sec.72 (1A).. Changed to the insured under a separate contract Broker not carrying out services for the customer no contact between them

15 IPT Premium splitting Do you write personal lines directly or indirectly? No No IPT due Yes Is the fee Mandatory? No No IPT due Yes Are the terms of the fee negotiable by the insured? Yes No IPT due No Is there is risk assessment required to determine the level of premium due under the policy? Yes No IPT due No The insurer is liable to account for IPT on your fee

16 IPT compliance Global issue, not just UK Tax Authority scrutiny EU mutual cooperation Penalties, interest, void policies? Brokers responsible?

17 IPT rate increase On or after 4 January 2011 Written premium date No transitional rules Importance of 22 June 2010

18 VAT rate increase Connected persons Six month rule 100,000 value rule Genuine supplies check rate Work spanning 4 January 2011

19 Partial Exemption Special Methods Do you write non-eu policies? No Review not required Yes BUT Do you receive services from overseas third Parties on associated companies? No No review required Yes Is your current PESM approval dated pre-april 2007? No No review required Yes Has your group structure or business activity changed since your current PESM was approved? No No review required Yes PESM review and amendment required

20 Outsourcing insurance services EU Commission review of the scope of the insurance exemption Andersen Consulting ECJ decision AXA Denplan decision

21 Questions and answers

22 This guide is prepared as a general guide. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. Always seek professional advice before acting. Littlejohn

Broking breakfast briefing

Broking breakfast briefing VAT for broker accounts staff 18 June 2010 VAT for broker accounts staff Introduction to VAT basic principles Partial exemption Group registration The liability of insurance