Insurance premium tax: are hauliers being overcharged?

Operators who carry out national and international work may be paying over the odds for the insurance premium tax (IPT) on their goods-in-transit insurance, has learned.

Speaking after the government increased the IPT rate from 6% to 9.5% at the beginning of November, Terry Marshell, MD of Anthony Jones Insurance Brokers, told that while IPT should only be levied on national work (international goods being exempt), many brokers apply the tax to the entire premium irrespective of the ratio of turnover, mileage or journeys that are attributable to international work.

“It used to be that insurers were forensic in terms of how it was broken down, but it’s something that has fallen by the wayside over the years,” Marshell said. 

An HMRC spokesman confirmed there is no prescribed way for brokers and insurers to calculate the ratio of national to international work when providing a quote; and no requirement for them to amend the costs at the end of the insurance period once the true, rather than estimated, ratio is known.

HMRC also said that insurers are not routinely required to provide any evidence of their IPT calculations to it, although they are required to keep evidence for possible inspection.

The tax collector has not indicated how often it asks insurers to see that evidence, however, or said how much of the ?2.9bn raised via IPT in 2014/2015 was accounted for by goods-in-transit policies.

Asked if the situation meant operators were paying the wrong amount of tax, HMRC would only say that insurers were obliged to apportion tax on a “just and reasonable” basis and that checks on such apportionments would form part of its ongoing tax assurance activities.

A spokeswoman for the Association of British Insurers said it could not confirm how IPT was being worked out by insurers and brokers.

The British Insurance Brokers’ Association told CM a domestic/international split on IPT was being worked out by brokers and insurers based on turnover, and that there should not be any under or overcharging.

A spokeswoman said estimated premiums were “adjusted at year-end when the actual figures are known”.