Broker trade body sees IPT as an additional burden on businesses already struggling to survive because of the pandemic
Biba has again called for the government to freeze insurance premium tax (IPT) in its 2021 manifesto launched today.
”The direct cost of taxation on policyholders should be frozen, and the indirect cost to insurance brokers in potential changes to administration needs careful consideration,” it said.
The Treasury takes 12p out of every premium pound as the standard IPT rate.
Biba said IPT was a “regressive tax that falls on consumers and businesses alike and acts as a major disincentive to the purchase of adequate insurance protection”.
The broker trade body’s members said their clients had been cutting back on cover already due to the impact of the pandemic, increasing their risk exposure. IPT was affecting the affordability of cover for many businesses, Biba added.
It cited a Zurich Municipal survey which found that 88% of respondents said IPT was a factor in businesses’ ability to afford cover.
Biba also highlighted the struggles being faced by public sector organisations and charities due to the increasing cost of IPT.
”Further rises to IPT will only exacerbate the pressure on public sector budgets”, it said.
Telematics and travel
Biba is also repeating calls it has previously made for IPT to be scrapped for young drivers using telematics devices.
It said there was a clear correlation between rising uptake of telematics and declining casualty rates for 17-19-year-old drivers. And an IPT exemption would serve to fuel that take up further.
The trade body is also calling for IPT rates to be reduced for the travel sector from 20% to 12%. It described the 20% rate as an ”historical anomaly introduced when some travel insurance was packaged with the cost of the holiday and these sales were unregulated”.
Now that the sector os regulated by the FCA, there was no longer justification for the 20% rate, Biba said.
Highlighting the “desperate” situation facing the travel industry due to the pandemic lockdowns, Biba said, adding that the higher rate of IPT is ”counterproductive to economic recovery and growth”.
At the last budget review in March 2020, then new Chancellor Rishi Sunak decided not to increase IPT or make any commitments on reducing the rate.
There are fears however that the economic havoc wreaked by Covid-19 will put pressure on the government to raise taxes where it can, with IPT seen as a ’soft target’. The Chancellor will reveal his latest budget next month.