UK insurers that provide cover in other European countries could find themselves...
UK insurers that provide cover in other European countries could be heavily penalised by foreign tax authorities for non-payment of premium tax, an industry specialist has warned.
Robert Jones, a tax partner with CLB Littlejohn Frazer, said: “When an insurance company underwrites a risk in any of the 20 (of the 28) European Economic Area countries involved, it is required to register and account for premium tax in each country even if it has no presence there – as confirmed by a European Court of Justice decision involving Kvaerner in 2001. But many insurers have been unaware of their responsibilities and, until now, the tax authorities weren't really aware of it being an issue.
“That state of limbo is about to be shattered, and tax authorities are now investigating this area. Many countries are getting tough and looking to levy penalties as much as 400% for non-payment of premium tax.”
“Although the fines will be annoying, what will really hurt is the cost of complying with this as it will result in vast amounts of lengthy, annoying and convoluted paperwork,” warned Jones.
"It is an enormous hassle that most firms could well do without. For small firms it could become a full-time job," he added.
The premium tax issue will also affect European firms underwriting risk in the UK.