Inter Group in Customs and Excise Irish tax scrutiny
Customs and Excise has questioned the legality of a tax loophole being exploited by a member company of Royal Bank of Scotland Insurance.
Options Insurance Services, part of Inter Group Insurance Services, has been paying just 2% Irish stamp duty instead of UK insurance premium tax (IPT) of 17.5%.
A Customs and Excise spokesman said: "While we would not comment on individual cases, it is difficult to see how a company established in Ireland selling insurance to UK travellers could legitimately be charging IPT at a lower rate than 17.5%."
The spokesman confirmed Customs and Excise would be reviewing the information supplied to it by Insurance Times.
But the legality of Galway-based Options Insurance Services' tax payment could be a grey area according to a firm of top UK accountants.
A senior partner said: "We have taken two counsels' opinion on this matter. One came back saying the practice was legal. The other decided it was illegal. It all comes down to where the contract is seen to be completed."
Options Insurance Services is thought to sell about 200,000 policies a year in the UK market, with prices starting from as low as £6 for a single trip.
While a number of insurers contacted were aware of the tax loophole, Inter Group is thought to be the only company currently exploiting it.
The Customs and Excise spokesman said: "Travel insurance policies of four months or less taken out by a person in the UK by mail order, post, telephone or the internet, are regarded as taken out in the UK, regardless of where the insurer or broker is based and are therefore subject to 17.5% IPT.
"Travel insurance for periods greater than four months are subject to IPT in the UK where the traveller is habitually resident in the UK at the time the contract is entered into."
When contacted Inter Group declined to comment.