DID you realise that you could be overpaying UK-based insurance premiums by up to 20 per cent?
That’s the question the Office of Fair Trading (OFT) is asking in relation to UK Insurance Premium Tax (IPT).
IPT, levied general insurance premiums within the United Kingdom, is not applicable to policies for Manx residents, the OFT explained.
Advice centre manager Andrea Tabb said: ‘Many of us now buy our insurance via online comparison sites and, although many UK underwriters do remove the tax for Manx residents, we recommend that you always double check.’
There are two rates of IPT – but the tax is not chargeable where the policy holder is habitually resident in the Isle of Man, or the risk being insured against is in the Isle of Man (e.g. a building on the island, or a car registered on the island).
IPT, introduced in UK 1994 Finance Act operates on a dual level – a standard rate of 6 per cent and a higher rate of 20 per cent.
The higher rate applies to, among other things, all travel insurances and also to insurance policies purchased as add-ons to other products, for example on an extended warranty when you buy a television.
The tax is applied to most general insurance policies where the risk is located in the UK, including motor, household, medical (including long-term cover), income replacement, travel and other protection cover. Notably however, life insurance policies and long-term plans with an investment element do not attract IPT.
Ms Tabb advised consumers to confirm with their insurance companies, brokers, electrical retailers or travel companies – before they take out insurance with UK companies – that the tax will not be charged.
She said: ‘It will come as a surprise to most people that they may be paying this tax. It may be that companies do not realise that the tax is not chargeable to Isle of Man residents. Always check before handing over your money.’
More information is available on the HM Revenue and Customs website www.hmrc.gov.uk or by calling its helpline on 0845 0109000 for further advice.’
Have you ever found yourself paying too much tax on insurance?
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