IPT07650 - Insurance premium tax: Accounting for Insurance Premium Tax: The special accounting scheme: How the guidelines are applied

The guidelines relating to undue delay, mentioned on the previous page, do not have statutory force. Your initial approach to an insurer who has not operated within the terms of these expectations should be to explain what our expectations are, and explain that we expect all insurers to abide by them. There are three main points, which can be made to insurers to encourage them to conform.

  1. We are keen to operate the tax in a common-sense way, in partnership with the industry. If the tax is to operate on this practical basis, it is necessary for both the industry and HMRC to operate the tax in a co-operative spirit. Where there is serious or persistent failure to observe the guidelines set out in Notice IPT 1, HMRC might have to seek statutory backing for these time limits. It would be unfortunate if the unwillingness of a few to follow the non-statutory guidelines, lead to the introduction of statutory arrangements with all the complexity and inflexibility that would entail for all insurers.
  2. Perhaps of more immediate concern to insurers, HMRC has the power to expel insurers from the special accounting scheme (see IPT07610). The insurer would then have to use the basic cash receipt tax point for all their business. Whilst we would be reluctant to resort to this option, where we encounter repeated or serious cases of tax point abuse, we would consider using these powers in order to protect the revenue.
  3. The expectations set out here apply to insurers using the special accounting scheme. They are necessary to maintain broad equity of treatment with insurers who use the “basic” or cash receipt accounting system. An insurer should not gain a significant tax point advantage by using the special accounting scheme rather than the basic (cash receipt) tax point.