Maintaining the IPT register: registration: the meaning of ‘effective date of registration’
Insurers are required to notify the Department of their need to register within 30 days of forming an intention to receive taxable premiums. Their effective date of registration is worked out by reference to section 53(4) of the Finance Act 1994:
Where a person is liable to be registered … the Commissioners shall register him with effect from the time when he begins to receive premiums … ; and it is immaterial whether or not he notifies the Commissioners…
Therefore the date an insurer receives their first taxable premium is the insurer’s effective date of registration (not the date that the IPT 1 is completed, and not the date on which the insurer forms the intention of receiving taxable premiums). For insurers using the cash receipt method of accounting, identifying the effective date of registration is quite straightforward.
Where an insurer is using the special accounting scheme, the effective date of registration is still as provided for in section 53(4); that is, the date the insurer receives their first taxable premium. Most insurers with established businesses who intended to use the special accounting scheme when the tax was announced were receiving premiums on a continuous basis, and thus the majority showed 1 October 1994 as their effective date of registration on their IPT 1.
The situation becomes more complex where insurers (for example, captives) only receive one premium a year, and they write it on a different date to the date of receipt.
- An insurer writes a premium on 1 October 1999. The insurer is a captive, receives only one premium a year, and wishes to account for tax under the special accounting scheme. The insurer will not actually receive the premium written in October until 1 April 2000.
- Therefore, under the provisions of section 53(4), that insurer may not be registered until 1 April 2000.
IPT07600 provides details on the special accounting scheme under which premiums may be treated as received by the insurer on the premium written date. In the example above the insurer cannot treat 1 October 1999 as the date the premium is received (and it follows that this is not the insurer’s effective date of registration) because of the provisions of Regulation 23(1) which deals with premiums treated as received on the premium written date. It provides that premiums may be treated as received by the insurer on the premium written date provided:
(a) an insurer has made an entry in his accounts showing the premium as due to him;
(b) the premium written date falls within a relevant accounting period; and
(c) the date of receipt does not fall within an accounting period … which is not a relevant accounting period…
In the example above, the insurer has written the premium on 1 October 1999, however, they cannot register until 1 April 2000 and, as such, cannot be using the special accounting scheme in October. Thus the premium written date does not fall within a relevant accounting period for special accounting scheme purposes, and the condition at Regulation 23(1)(b) is not met. Therefore the premium may not be treated as received by the insurer on the premium written date and the insurer must account for tax on the date of actual receipt of the premium (1 April 2000) which will also be their effective date of registration.