Next June Insurance Premium Tax is due to rise from 10% to 12%. It already stands at 20% on Travel policies.
Is it now time to consider scrapping Insurance Premium Tax altogether and replacing it with VAT, as applies to most other services?
Rather than increase everyone’s premiums this could in fact lower them!
At present insurance providers cannot recover VAT, so every claim that is paid costs insurers 20% more than it should. Insurers cannot recover VAT on their overheads, unless they have some other source of income that is VAT registered and even then they would have to prove that their costs directly relate to that area of their business.
If claims were to cost less to insurers and other overheads reduced they would reflect these in their premiums. At present customers have to bear the inherent VAT costs plus the Insurance Premium Tax.
We have seen Insurance Premium Tax creep up steadily with spurious reasoning for its increase. Prior to BREXIT it seemed logical to equate this tax to similar ones on the Continent, but now this reasoning is redundant.