Calculating the amount of security: the quantum calculation: estimating future revenue risk using taxable turnover: Insurance Premium Tax
It is possible to calculate the amount required in security by estimating future liability based on the registrable person’s estimated ‘taxable premium’.
The person includes on the IPT1 registration document an estimate of the annual level of taxable premium. This can be used where only standard rate contracts are involved. Always round up the figure.
Estimated taxable premium £1,000,000.00 x standard rate 6% / 2 = six month quantum of £30,000.00.
If the only information available to you is the estimated taxable premium on the IPT1, and you are satisfied that higher rate contracts are also involved, consider issuing a warning letter to prompt the person to provide more information on which to base your calculation of the amount of security.
It is essential that you keep a written record of how you came to your decision on the amount of security. This will be invaluable if the person appeals to tribunal or requests a review, see SG70200.