Management Clinic: Troublesome premium tax

In common with most people in the industry, I was surprised by the way that this piece of legislation was presented, without really thinking through the implications for the unpaid tax collectors (such as you) who would be expected to implement and collect it. Needless to say, we had a number of enquiries from our clients for guidance and, apart from saying that they would provisionally need to make provision for collection, there was not a lot more we could add.

The British Insurance Brokers' Association is in touch with HM Revenue & Customs and it is a changeable situation. It was clear that, following the Homeserve case, the cash-strapped government identified an opportunity to generate additional revenue through taxation. What is puzzling is that, had the government researched properly the way in which the legislation was ultimately drafted, it would not have become legislation in this form. In turn, it is perhaps an issue that the industry should take up with the Treasury for the future, to ensure that insurance-related legislation is workable when proposed and then implemented. There clearly needs to be better communication, done in absolute confidence.

One important point is not to have a knee-jerk fees increase to claw it back but to make sure that any changes to charges are reviewed through your Treating Customers Fairly gap analysis process first.

Politics

Finally, bear in mind that the ultimate decision will be political. The government is only concerned with the next election: if it wins then we will all be hit with a very hard time as the Treasury tries to balance the books. If it loses then the aim is to ensure that the Conservatives are saddled with commitments that will be unpopular to cancel.

Until you hear more, the situation can be dealt with only as it stands today: IPT is due on brokers' fees, to be collected by the insurers, for policies involving individuals buying in a personal capacity (excluding mid-term adjustments) from 9 December 2009.

 For more on IPT, see Professional Broking, March 2010, Focus on p.18