IoM Taxpayers Alerted To UK Insurance Premium Tax

by Jason Gorringe, Tax-News.com, London

10 May 2011

The Isle of Man government has clarified aspects of the UK's Insurance Premium Tax (IPT) regime, paid by taxpayers in the Isle of Man on general insurance policies where the risk is located in the UK, and has warned taxpayers to be cognizant as to whether they are in fact exempt.

IPT applies to general insurance policies including motor, household, medical (including long-term cover), income replacement, travel and other protection cover. Life insurance policies and long-term plans with an investment element do not attract IPT.

There are two rates of IPT – a standard rate of 6% and a higher rate of 20%. The higher rate applies to, amongst other things, all travel insurance and also to insurance policies purchased as add-ons to other products, for example on an extended warranty a television attracts IPT at the higher rate.

The tax however is not chargeable where the policy holder is habitually resident in the Isle of Man, or the risk being insured against is in the Isle of Man (e.g. a building in the island, or a car registered in the island).

Some UK insurance companies supplying cover to island residents understand that the tax is not chargeable and automatically remove it from quotes, the government said, but warned that in its experience this is not always the case.

"We are aware of a number of cases where the tax has been charged and only through the persistence of the customer has the tax been refunded," the government noted.

The government has advised consumers to confirm with their insurance companies, brokers, electrical retailers or travel companies that the tax will not be charged, in applicable cases, prior to taking out insurance with UK companies.

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