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HMRC internal manual

Insurance Premium Tax

Accounting for Insurance Premium Tax: the cash receipt accounting method: insurers using the basic cash receipt method

The use of this method imposes a considerable requirement on the insurer who receives premiums via agents, brokers or other intermediaries. This method of IPT accounting means that an insurer who uses intermediaries has to account for tax by reference to the date on which those intermediaries are paid. Clearly the situation is much more straightforward for those insurers who deal with the insured, and receive premiums directly from them.

In practice this accounting scheme is used primarily by:

  • insurers who receive premiums directly from the insured;
  • insurers with ‘tied’ or closely controlled intermediaries who can be relied on to pass premiums quickly to the insurer (this means that the insurer avoids having to fund the tax before he has the premium);
  • insurers using intermediaries in the same corporate group.

Two simple examples show how this scheme works:

Example 1

  • Cheque received by insurer direct from insured on 30 May.
  • Cheque banked On 31 May.
  • Sum credited to insurer’s account on 2 June.
  • Tax point: 2 June (or 30 or 31 May, if insurer chooses).


Example 2

  • Cheque received by broker from insured on 30 May 1995.
  • Cheque banked by broker on 31 May.
  • Sum credited to broker’s account on 2 June.
  • Cheque received by insurer from broker on 7 June.
  • Cheque banked on 8 June.
  • Sum credited to insurer’s account on 12 June.
  • Tax point: 2 June (or 30 or 31 May, if insurer chooses).