Navigating the IPT maze Neil Smith KPMG In the UK 24 June 2016
What am I going to cover? Broker services IPT and VAT The VAT Aspiro case and potential VAT and IPT implications for intermediaries Tax avoidance disclosure regimes Extending the tax avoidance disclosure regimes to IPT 2
Broker services IPT and VAT Aspiro (C-40/15)
What am I going to cover? 1 The insurance VAT exemption in EU and UK law 2 Premium for UK IPT purposes 3 How the intermediary exemption has been operated 4 The Aspiro case 5 Implications for Brokers 4
The insurance VAT exemptions in law Insurance and reinsurance transactions, including related services performed by insurance brokers and agents ART 135(1)(a) Directive 2006/112 1. Insurance transactions and reinsurance transactions 2. The provision by an insurance broker or agent of any of the services of an insurance intermediary in a case where those services: a) Are related (whether or not a contract of insurance or reinsurance is finally concluded)to an insurance or reinsurance transaction; and b) Are provided by that broker or agent in the course of his acting in an intermediary capacity VAT ACT 1994, SCHEDULE 9, GROUP 2 5
How the intermediary exemption has been operated in UK? 1 Prospecting for new business Claims handling VAT Exempt Collection of premiums Administering insurance contracts 6
Aspiro (C-40-15) Aspiro Claims handling services Fee Insurer 1 Are Aspiro s services capable of being treated as VAT exempt as insurance in their own right? 2 If no, are Aspiro s services related services provided by an insurance broker or an insurance agent? 7
Aspiro (C-40-15) (cont.) Aspiro Claims handling services Fee Insurer 1 Are Aspiro s services capable of being treated as VAT exempt as insurance in their own right? No 2 If no, are Aspiro s services related services provided by an insurance broker or an insurance agent? 8
Aspiro What are related services? Two tests: 1 Supplier, to be an agent or broker, must have a relationship with both the insurer and the insured 9
Aspiro What are related services? (cont.) Two tests: 1 Supplier, to be an agent or broker, must have a relationship with both the insurer and the insured Condition met 2 The activities performed must cover the essential aspects of the work of an insurance broker or agent, notably finding prospective clients and their introduction to the insurer with a view to the conclusion of insurance contracts Condition not met 10
Aspiro What are the VAT implications? Increased costs for UK insurers? 1 CJEU has re-confirmed that claims handling services not VAT exempt Impact Change to existing policy? Breadth of the UK s exemption too wide 11
The premium for IPT in UK law Interpretation: premium (1) In relation to a taxable insurance contract, a premium is any payment received under the contract by the insurer, and in particular includes any payment wholly or partly referable to-- (b) costs of administration FINANCE ACT 1994 s72 (1) Where an amount is charged to the insured by any person in connection with a taxable insurance contract, any payment in respect of that amount is to be regarded as a payment received under that contract by the insurer FINANCE ACT 1994 s72 (1A) 12
Intermediary costs of administration 1 Commonplace for intermediaries to charge the insured administration costs 2 Does the intermediary find prospective clients and their introduction to the insurer with a view to the conclusion of insurance contracts 13
Intermediary administration charges Insured Administration services Fee Intermediary Broker 1 Are Intermediaries services capable of being treated as VAT exempt as insurance in their own right? No 2 If no, are Intermediaries services related services provided by an insurance broker or an insurance agent?? 3 VAT and/or IPT?? 14
What is the potential implications? 1 Does Aspiro mean administration charges to the insured by intermediary brokers are less likely to be seen as VAT exempt insurance related services? 2 What charges are likely to be affected? 3 Does Aspiro blur the line between VATable and IPTable administration charges? 4 How will different jurisdictions implement the judgment? 15
UK Tax avoidance disclosure regime for IPT
UK HMRC Consultation Strengthening the tax avoidance disclosure regimes Current UK Tax Avoidance Disclosure Regimes: VAT Avoidance Disclosure Regime (VADR) For VAT Disclosure of Tax Arrangements (DOTAS) For certain direct taxes 17
UK HMRC Consultation Strengthening the tax avoidance disclosure regimes (cont.) VADR Taxpayers must notify HMRC if they use: - Listed schemes; or - Hallmark schemes (where the purpose is to obtain a tax advantage) DOTAS Promoters (and sometimes users) of schemes must notify HMRC where the arrangements confer a tax advantage 18
UK HMRC Consultation Strengthening the tax avoidance disclosure regimes (cont.) Consultation proposes: Aligning VADR and DOTAS avoidance regimes Expanding the regimes to include Insurance Premium Tax and some other indirect tax regimes HMRC state they have evidence of avoidance and ask: Do you see any reason why IPT should not be brought within scope? Which hallmarks do you believe are suitable for IPT? The deadline for responding is 13 July 2016 19
UK HMRC Consultation Strengthening the tax avoidance disclosure regimes (cont.) How might this affect IPT: Listed or Hallmark Schemes (which have as their main purposes a tax advantage) may be required to be notified to HMRC Tax payers and/or promotors may have to notify This is a disclosure requirement The current disclosure regimes do not prevent the use of notified schemes 20
UK HMRC Consultation Strengthening the tax avoidance disclosure regimes (cont.) 1 What impact will a disclosure regime have? 2 Are we seeing an increased focus on IPT by tax authorities across Europe? 21
Thank you
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