Insurance Intermediaries saved millions in High Court tax case

A High Court judgement has overturned on appeal a 2008 Tax Tribunal ruling that organisers and administrators of insurance contracts were liable to charge UK insurance premium tax (IPT).  Many intermediaries, faced with tax assessments running into the millions, are now relieved of the potential liability.

The background to the case involves Homeserve, the emergency home plumbing and electrics call out specialist.  As an additional service for its customers, it started providing a 3rd party insurance assistance product covering homeowners for call outs.  The actual insurance contract was provided by Belgium insurer, Inter Partner Assistance, an AXA subsidiary.  Homeserve administered the contracts, including processing applications, handling claims and renewing contracts.  It concluded a separate contract with the homeowners for these services, charging a £14 per policy administration fee in addition to insurance premiums.

HMRC concluded that this additional contract was actually a supply of insurance services too, and was therefore liable to UK IPT at 5%.  Over a period of many years, this amounted to around £1 million tax that Homeserve had failed to charge homeowners, and which it was now liable for. 

Last week, the High Court overturned the IPT Tribunal, ruling no IPT was due, finding that the meaning of the contract was not for insurance services.

Richard Asquith, head of TMF IPT Services commented

“This new ruling comes as little surprise since as it was clear that Homeserve’s intentions were only to act as a facilitator.  Nevertheless, this has come as a huge relief for many parts of the industry which had been sent into flights of panic at the thought of having to meet unscheduled IPT bills.

About TMF IPT

TMF IPT provides international IPT compliance services.  It is a part of the TMF Group, the world’s leading independent provider of accounting and corporate secretarial services. It operates out of 86 offices in 65 countries.

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Article Added Friday, 03 July 2009

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