This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Insurance Premium Tax

Overview and the law: how to determine whether there is a contract of insurance: service contracts

Here a person enters into a contract and pays for a certain level of service over a specified period. Gas boiler or central heating service plans are typical examples of these contracts. There is no level of uncertainty because the service will be provided whether or not a breakdown occurs, although the amount of work required may not be precisely known in advance. Although the payment made for a year’s service may be called a premium there is no contract of insurance, and the premium is simply an advance payment for service. (The provider of service contracts may insure themselves against costs of repairs exceeding a certain level but this is a contract of insurance separate from the service contract itself).