Background Note
11.IPT is charged as an inclusive amount within the premium for a taxable insurance contract. As defined, the premium includes all payments received under the insurance contract and certain other payments related to it.
12.The section closes an avoidance loophole that exploited the use of separate contracts, which are excluded from the scope of IPT by section 72(1A)(b) of FA 1994, by means of an intermediary charging amounts under a separate contract with the insured that normally form part of the premium received by an insurer under a taxable contract of insurance.
13.The section does not apply to insurance bought by businesses, as avoidance has not been seen in this sector of the market – HM Revenue & Customs will keep the situation under review. The power in subsection (4) will allow any necessary changes to extend the scope of the provision to be made by secondary legislation at some time in the future should there be any evidence of the avoidance moving into other areas.
