DMBM540390 - Debt and return pursuit: Insurance Premium Tax: Power to take recovery action for an IPT debt
The majority of this manual will be archived on 30 Apr 2024. If there is content within this manual you use regularly, email hmrcmanualsteam@hmrc.gov.uk to let us know.
IPT due from any person shall be recoverable as a debt due to the Crown (paragraph 7 (1) of schedule 7 to the Finance Act 1994).
Amounts assessed (including penalties and interest) are deemed to be amounts of IPT and may, therefore, be recovered as debts due to the Crown.
Debts due to the Crown
The legislation covering Insurance Premium Tax is in DMBM450160.
IPT debts and amounts recoverable as IPT may be subject to civil recovery proceedings.
Amounts collected as IPT from an insurance policy that was later deemed to be exempt are not recoverable as IPT or as debts due to the Crown.
Power to recover assessed amounts as tax due
S.56 (7) of the Finance Act 1994 provides the authority to recover assessments. The power to assess (e.g. prime assessment) is section 56 (1) of the Finance Act 1994. Errors & Assessments Policy Team has responsibility for policy for assessments.
Power to recover penalties and interest
Paragraph 25 (8) of Schedule 7 to the Finance Act 1994 provides the authority to recover amounts of penalties and interest as if they were tax.
Penalties Team has policy responsibility for interest and civil penalties.
Time limits for making assessments
A debt reported for recovery action must be capable of being enforced. There are time limits for the making of assessments.
1 year rule |
Section 56 (5)(b) of the Finance Act 1994. Assessments made in the absence of a return or an acceptable return, officer’s assessments and assessments in cases of overpayments of tax, must be made within 1 year of the time when facts emerged to justify the making of the assessment. |
Alternatively: | |
2 years rule |
The assessment, including assessments for penalties or interest, must be made within 2 years of the end of the prescribed accounting period or relevant period (s.56 (5)(a) and paragraph 26 (2) of Schedule 7 to the Finance Act 1994). |
3 years rule |
This rule applies in all cases where the 1 year, 2 years, and 20 years rules do not apply. No assessment shall be made more than 3 years after the end of the relevant prescribed accounting period (paragraph 26 (1) of Schedule 7 to the Finance Act 1994 as amended). |
20 years rule |
Where a person has been convicted of fraud, tax has been lost through evasion, or civil penalties have been issued for failure to register, the time limit for making assessments is extended up to 20 years after the end of the accounting period (paragraph 26 (4) of Schedule 7 to the Finance Act 1994 as amended). |
Errors & Assessments Policy Team has policy on time limits for assessments.
Repayment of Bad Debt Relief (BDR)
There are no explicit bad debt relief provisions in IPT. However, if an insurer writes a premium in his books and accounts for tax due, expecting to receive a premium direct from the insured person, and he doesn’t receive the premium and so cancels the policy (reversing his accounting entry), he may claim a tax credit.
If he subsequently receives the premium from the insured person, he should repay the tax credit. The amount is recoverable as tax due under Regulation 25 (2) of the Insurance Premium Tax Regulations 1994.