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HMRC internal manual

Insurance Premium Tax

Accounting for Insurance Premium Tax: transitional accounting arrangements: special accounting scheme

For insurers using the special accounting scheme, there may be a concessionary period granted which is also known as the transitional period, which ends on the concessionary date. In some circumstances the decision may be made not to grant a concessionary period, such as the rate rises announced in the June 2010 Budget.

If a concessionary period is not granted, the new rate of tax will apply to taxable premiums with tax points under the special accounting scheme that fall on or after the implementation date of the rate of change regardless of the inception date of the contract.

If a concessionary period is granted the old rate of tax will apply to taxable premiums for contracts incepting (beginning or starting) before the implementation date of a rate change that are written on or after that date, provided the tax point for those premiums occurs before the end of the transitional period.

The past dates for each rate change (Budget date, implementation date and concessionary date (if applicable)) are given in IPT07860.

The new rate of tax will apply to all taxable premiums for contracts incepting on or after the implementation of a rate change. All taxable premiums, regardless of the inception date of the contract to which they relate, that have a tax point after the concessionary date will be subject to the new tax rate.

If a concessionary period is granted the following examples show how the transitional accounting arrangements will apply:

Example 7

  • A contract incepts before a rate change but is written into the insurer’s records during the transitional period.
  • The insurer is using the special accounting scheme.
  • The contract is liable to the old rate of tax.

 

Example 8

  • A contract incepts after the rate change and is written into the insurer’s records during the transitional period.
  • The insurer is using the special accounting scheme.
  • The contract is liable to the new rate of tax.

 

Example 9

  • A contract incepts before the rate change and is written into the insurer’s records after the end of the transitional period.
  • The contract is liable to the new rate of tax.