An overload of acronyms, as MoJ & HMT issue ToR for CMC review

Two points in the Chancellor’s summer budget would probably have come as a surprise to those involved in insurance business.

The increase in premium tax from 6% to 9.5% for polices written after 1 November 2015 will hardly have been welcomed. The Treasury expects this to raise half a billion pounds in the 2015/16 financial year and around one and a half billion pounds annually in future years. The lead-time was really quite limited, with 1 November less than four months after the Chancellor’s budget speech in early July. We might have expected an April 2016 implementation of this new tax rule, given that Government reforms tend to attach on either 6 April or 1 October of each year (these being known as “common commencement dates”). One very plausible explanation for the adoption of a 1 November for the higher IPT rate is that it will allow the Treasury to collect higher rate of IPT on the vast numbers of policies renewing on 1 January and on 1 April 2016.

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Summer Budget 2015: “action to make sure that consumers get a better deal”

The Chancellor used this phrase in introducing the part of his budget speech that covers insurance. The budget materials point to close liaison between Treasury and the Ministry of Justice, in that they:

  • announce a fundamental review of the regulation of claims management companies, reporting to both Treasury & MoJ, and
  • reconfirm that the Insurance Fraud Task Force will report to both these departments by the end of the year.

The less welcome news for insurance customers is a 50+% increase in IPT (Insurance Premium Tax). In November, the rate will go up from 6% to 9.5% of premium charged.

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