Concern over possible IPT rise in UK’s autumn Budget

There is concern in the UK, especially from small to medium-sized enterprises (SMEs), that the Chancellor will use the upcoming Budget to further increase insurance premium tax (IPT) from its current standard rate of 12%. Independent research commissioned by Allianz revealed that 85% of the 250 SMEs that took part in the research said they were concerned about the financial impact on their businesses if there is another rise in the rate of IPT. Allianz noted that the standard rate of IPT increased three times between November 2015 and June 2017 – rising from 6% to 12% – and the fear is the rate could keep on rising, it said. Higher rates of IPT are already imposed in other EU countries such as Finland (24%), The Netherlands (21%) and Germany (19%). The UK Budget will be announced on 29 October. Dave Martin, Allianz’s director of SME and corporate partnerships, said: “At a time of significant uncertainty for SMEs about what the future holds post-Brexit, we are calling on the Chancellor not to increase the tax burden on businesses by increasing insurance premium tax.” The survey also showed the unpopularity of the tax because of its “underlying unfairness”, with 76% of SMEs agreeing that IPT is a tax on prudent businesses that take out insurance to protect their property and people. Allianz added: “The suggestion that IPT is also something of a stealth tax is supported by the research finding that nearly one in three small businesses did not know they are paying it.” Last month, the UHY Hacker Young Group, a network of UK chartered accountants and business advisers, pointed out that the UK Government’s income from IPT increased to £6bn in 2017/2018, up 22% on the £4.88bn collected the previous year – a far bigger impact on businesses and consumers than had been predicted by the government. According to UHY Hacker Young, the government forecast that the IPT increase would generate an extra £680m in tax raised. However, the added tax raised from businesses and consumers was £808m last year – 19% more than the original prediction. It added that one of the key factors driving the higher-than-expected tax take is that businesses are having to take out more insurance policies than in the past. Richard Lloyd-Warne, a partner in UHY Hacker Young’s London office, said: “The Treasury is benefiting from the necessity of insurance by more than [it] had originally expected. The fact is that businesses are now facing more threats than ever, all of which must be insured against. Just as the risk of a cyberattack has ballooned over the last few years, new threats are likely to spring up in the future.” The Federation of Small Businesses’ national chairman Mike Cherry said: “IPT deters small firms from making the right choices. It’s hard for us to persuade small businesses to take on the different kinds of protection they need when they’re constantly being hit with increases to this stealth tax. Whether it’s income protection, trade credit or cyber insurance – small businesses are thinking twice about purchasing the right cover because of the ridiculous IPT. Enough is enough. IPT has already soared from 6% to 12% over the past three years. If the government wants to encourage responsible behaviour among small firms, it should rule out any further hikes to this ludicrous levy.” As the Budget approaches, the Association of British Insurers has relaunched its #IPTsUnfair campaign, while the British Insurance Brokers’ Association has written to HM Treasury calling for a freeze in the rate of IPT, and has launched a new campaign called Freeze IPT.

Concern over possible IPT rise in UK’s autumn Budget

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