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HMRC internal manual

Insurance Premium Tax

Liability of insurance contracts: Higher rate of IPT: Travel insurance: Free and discounted insurance

Insurance supplied free of chargeBefore the extension of the higher rate to all taxable travel insurance, where an intermediary provided free travel insurance with holidays, the insurer accounted for IPT at the standard rate on the premium charged to the intermediary.

To ensure that all providers of travel insurance are treated in the same way (bearing in mind that direct insurance providers have less scope to subsidise free insurance from other income sources) this treatment has been withdrawn and the higher rate applies to all free insurance. The premium subject to the higher rate is the amount charged by the insurer to the intermediary.

Discounted travel insuranceWhere insurance is offered by an intermediary at less than the cost paid to the insurer, the whole premium is liable to the higher rate, irrespective of how much the insured pays.

Previously, as with discounted insurance for motor vehicles and relevant goods, there was a concession allowing only the element paid by the insured to be liable to the higher rate. That element of the insurance subsidised by the intermediary was liable to the standard rate. This concession was withdrawn from travel insurance.