Finance minister pours cold water on insurance premium tax exemption

Jane Ellison, Financial Secretary to the Treasury, says it would be difficult to implement

Jane Ellison
Jane Ellison

Jane Ellison, the Financial Secretary to the Treasury, has reiterated that a charitable exemption from the insurance premium tax would be difficult to implement, despite claims to the contrary from the Charity Finance Group.

IPT is a tax on general insurance premiums, such as home, car and travel insurance, and many charities, especially those with property, are affected. The rate of IPT is increasing to 12 per cent in June, by which time the rate will have doubled in only 18 months.

In an answer to a written parliamentary question from Dan Jarvis, the Labour MP for Barnsley Central, about whether the Chancellor of the Exchequer has considered introducing a special rate of IPT for charities, Ellison said it would be difficult for insurers to implement.

Ellison said: "All tax policy is kept under review. However, it would be challenging to implement an exemption for insurance purchased by any specific group.

"Any such legislation would be very difficult for insurers to implement since this would require them to differentiate between customers who were buying the same type of insurance products."

Ellison said that the IPT was a tax on the insurer and that there is "no obligation to pass the increase on to the customer".

This is the second time that Ellison has poured cold water on requests to exempt charities from the IPT. She did so in a written answer published in January in response to a question from the Conservative MP Fiona Bruce.

In response, Andrew O’Brien, head of policy and engagement at the CFG, said: "IPT is not going to affect only big charities, but also charities of every size.

"The cost of IPT to charities is due to increase by £25m this year, and this is something that the government can easily reverse by creating a special rate of IPT for charities or abolishing it for charities altogether. This is a drop in the ocean for the government, but it could make a massive difference to charities on the ground.

"There are already two rates of IPT and a number of exemptions, so it is not logistically difficult for insurers to do this. We have already discussed how this could be done with insurers and we would encourage the government to work with charities and the insurance industry to put steps in place to reduce the negative impact of IPT on charities."

A petition was launched at the end of 2016 by Simon Hickman, chief executive of the insurance firm Access Insurance, urging the exclusion of charities from IPT. The petition has almost 1,500 signatories so far.

The Charity Tax Group is also campaigning for an IPT exemption or reduced rate for charities, and called for these reforms in its most recent Budget submission.

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