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HM Revenue and Customs Brief 39/08

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Issued 19 August 2008

Insurance Premium Tax: Revised registration procedures for overseas insurers

This Revenue & Customs brief outlines the revised procedures for non-UK based insurers to register and account for Insurance Premium Tax (IPT). It also explains the revised circumstances under which we would seek to recover tax directly from an insured person. These changes were announced in Budget 2008 and come into effect from 21 July 2008.

Background

All insurers underwriting taxable insurance in respect of risks located in the UK are required to register and account for IPT, regardless of where the insurer is based. Prior to the changes announced in the Budget, insurers based in another EU member state or outside the EU, were required to appoint a UK tax representative to deal with their IPT affairs. The tax representative was jointly and severally liable so that, in the event of a failure by the insurer, the representative assumed legal responsibility for the insurerís IPT obligations, such as submitting returns and paying any tax due.

Following representations from the insurance industry, a review of the tax representative requirement, including a formal consultation exercise, was carried out in 2007. It was clear from this that the requirement was difficult and onerous to operate and, in extreme cases, resulted in non-compliance by overseas insurers, putting their UK counterparts at a competitive disadvantage. Furthermore, recent European Court of Justice judgments have caused us to consider its approach to the issues.

As a result, measures were announced in Budget 2008 to remove the compulsory requirement to appoint a joint and severally liable tax representative. Our power to recover IPT from the insured person was also restricted to circumstances where the insurer is based outside the EU and is not covered by a Mutual Assistance provision or similar agreement.

Revised procedures for non-UK based insurers

From 21 July 2008, non-UK based insurers will have two options for dealing with their UK IPT affairs. They can either appoint an agent to act on their behalf, or they can deal with us directly.

Appointing an agent

Whilst it would be preferable to have an agent based in the UK, we recognise that non-UK based insurers may prefer to use an agent based elsewhere in the EU to represent its tax affairs in both the UK and in other member states. We will, therefore, allow non-UK based insurers to appoint an agent based anywhere in the EU. We cannot, however, accept an agent based outside the EU.

We will require written authorisation from the insurer to deal with an agent on their behalf and will need a new authorisation each time there is a change of agent. The authorisation must give full details of the agent and the date on which they begin to act for the insurer. Existing tax representatives can continue to act for insurers and neither they nor the insurer they act for needs to take any action in respect of the IPT registration. The tax representative continues to be jointly and severally liable for any tax due before 21 July 2008.

Where an agent is appointed all documents, such as returns etc, will be sent to the agent rather than to the insurer. While the agent will be expected to deal with the insurerís day to day IPT affairs, such as compiling and submitting returns or making payments etc, they will not be liable for any tax due. However, in the future, agents may be liable to civil penalties in respect of certain errors on returns or other documents. Insurers need to ensure that whoever they nominate to act as agent is fully capable of handling their IPT affairs. The insurer may not, for example, be able to rely on any failure by the agent as an excuse for failure to discharge their own IPT responsibilities. In particular, the insurer and their agent will need to ensure that there are suitable arrangements in place for the relevant business records to be made available in the UK, should we need to see them.

Dealing directly with HMRC

As an alternative to appointing an agent, non-UK insurers may decide to deal with us directly. This option is available to newly registered insurers or insurers who are already registered and are currently using a tax representative. In the case of existing registrations, the insurer simply needs to notify us in writing of the date from which they will be dealing with their own IPT affairs. Insurers who deal with their own IPT affairs will need to ensure that, as far as possible, arrangements are in place for records to be produced in the UK should we need to see them. In most cases, this will involve the insurer posting a selection of requested records to us for examination. The records would be returned on completion of our enquiries.

Registration form

The IPT registration form, IPT1, will be amended to reflect these changes. There will be a space on the form for non-UK insurers, who are registering for the first time, to indicate whether they intend to appoint an agent or to deal with us directly. There will also be a space to record the agentís particulars and a declaration that we can deal with the agent in respect of the insurerís UK IPT affairs. Insurers who are already registered need take no action unless they wish to change their current arrangements, in which case they should write in to advise us at the address shown below.

Returns and payments

Where an agent is based in another member state, or where the insurer is dealing with their own IPT affairs, contact with the insurer will be via one of our offices in London. Return forms will be issued to the agent or insurer as required via the London office, but should be sent back to the normal address shown on the back of the IPT return form:

HM Revenue & Customs
Central Collection Unit (IPT)
21 Victoria Avenue
Southend on Sea X
SS99 1AS

Because of the additional time involved in posting correspondence to a non-UK address, insurers or agents will have less time in which to complete and submit the returns, but hopefully this will be kept to no more than a few days. Payments can be made in any currency. We accept payment via direct debit, from a UK bank account. We are also able to accept payments directly from a UK or overseas bank account using BACS or CHAPS. Where possible we would encourage insurers or agents to make direct electronic transfers between bank accounts using one of the methods mentioned above.

Where payment is not made by electronic means, we can accept cheques, preferably drawn on a UK bank account, which should accompany the return form. While we will also accept cheques drawn on an overseas account, insurers or agents should bear in mind that these may take longer to clear through the banking system. Insurers or agents should also note that any exchange rate fluctuations between Sterling and other currencies will be borne by the business.

Liability of insured person to account for IPT

Prior to the changes announced in the Budget, we were able to recover IPT directly from an insured person in instances where a non-UK based insurer, had underwritten a taxable risk in the UK but had either failed to register and/or account for tax due. This provision applied to customers of all non-UK insurers irrespective of where the insurer was based. The Mutual Assistance Directives enable us to exchange information with the fiscal authorities in other EU member states and, where necessary, ask them to recover tax on our behalf. In addition, the UK has similar agreements in place with several countries outside the EU. With effect from 21 July 2008, therefore, the power to recover tax from the insured person has been restricted to customers of insurers based in countries where no such arrangements exist.

The IPT guidance and public notice will be amended shortly to reflect these changes.

For further help or advice please contact the National Advice Service on 0845 010 9000 or 0845 000 0200 (text phone).


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© Crown Copyright 2008.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.



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Article Published/Sorted/Amended on Scopulus 2008-08-22 16:21:13 in Tax Articles

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