The Insurance Premium Tax (Taxable Insurance Contracts) Order 1994

Explanatory Note

(This note is not part of the Order)

This Order, with effect from 1st October 1994, amends the insurance premium tax provisions in Part III of the Finance Act 1994 (the Act) by making a number of adjustments to the descriptions of insurance contracts which are not taxable (exemptions) and the way in which those exemptions are set out in the law.

Article 3 inserts a cross-reference in section 69 of the Act to the new location of the definitions of “lifeboat” and “lifeboat equipment” and deletes subsection (6) of that section.

Articles 4, 5 and 6 move the definitions of the exemptions from the tax in section 70 of the Act, together with various associated definitions from that section and section 73, to a new Schedule 7A to the Act. Some of these exemptions are also amended and certain new exemptions are included in the new Schedule.

Paragraph 2 of new Schedule 7A is a replacement for section 70(2)(b) of the Act, which exempts insurance contracts constituting “long term” insurance business (as defined in the Insurance Companies Act 1982), but extends the exemption to certain contracts taken out before 1st December 1993 that include an element of “general” insurance business but are treated as entirely “long term” business by the Insurance Companies Act 1982.

Paragraph 8 of new Schedule 7A is a replacement for sections 70(2)(h), (i) and 73(2) of the Act, which exempt insurance contracts relating to risks situated outside the United Kingdom, but includes an amendment so that the location of risk of contents insurance is unaffected by whether or not contents and building are insured under the same policy. This amendment is necessary to give effect to the second sub-paragraph of Article 46(2) of Council Directive 92/49/EEC (OJ L228, 11.8.92 p. 1).

Paragraph 9 of new Schedule 7A is a replacement for sections 70(2)(j) and 73(7) of the Act, which exempt certain insurance contracts relating to railway rolling stock, but extends the exemption to contracts of liability insurance relating to such rolling stock.

Paragraphs 10 and 11 of new Schedule 7A introduce a new exemption for certain insurance contracts relating to the Channel Tunnel and its equipment, and thus provide broadly equivalent reliefs to those enjoyed by cross-Channel ferry operators.

Paragraph 12 of new Schedule 7A is a replacement for sections 70(2)(k) and 73(8) of the Act, which exempt certain insurance contracts relating to goods in international transit, and includes confirmation of the application of the exemption to insurance of containers carrying such goods.

Paragraphs 13, 14, and 15 of new Schedule 7A are replacements for section 70(2)(1) of the Act, which exempts certain insurance contracts relating to export credit insurance, and extend the exemption to a range of insurance relating to export finance where there is an underlying export of goods or services from the UK.

Paragraph 16, which is in Part II of new Schedule 7A, contains certain interpretative provisions which apply for the purposes of Part I.

All the other provisions in the new Schedule merely reproduce the existing exemptions, and related interpretative provisions.