The Budget on Monday 29th October brought relief to the Insurance industry and The Association of British Insurers (ABI) as Chancellor Philip Hammond maintained Insurance Tax Premium (IPT) at its current rate of 12%. It had been feared it could be increased to 20%.
The IPT rate doubled in 2 years from 6% in 2015 to 12% in 2017. As each Budget has approached organisations such as the ABI have lobbied and campaigned in a bid to stop further rises in IPT, viewing the tax as a potential cost barrier for companies to invest in protecting their businesses through credit insurance. Current Brexit uncertainty and continued significant restructuring or loss of, well known high street brands such as Evans Cycles, Debenhams and Crawshaws (meat retailer), makes credit insurance more important than ever to protect suppliers. Any increase on IPT could place this protection out of the reach of some companies.
IPT is levied at 12% on most general insurance premiums, including Trade Credit insurance. Official tax receipts for August 2018 show IPT raised a staggering £1.35 billion for HMRC. The Treasury is predicting, for the period 2018/2019, the income to be in the region of £6 billion. Whilst the good news is there was no increase this year in the Budget, Insurance bodies continue to monitor and campaign for a total freeze if not a reduction, of this stealth tax.