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In light of the High Court finding for the taxpayer company in the Homeserve Membership Ltd insurance premium tax appeal, HMRC have published Revenue and Customs Brief 47/09.
In essence, the court ruled that the contract between Homeserve and the insured person fell outside the scope of IPT, being a separate contract to the taxable insurance contract.
The taxman has decided not to appeal the judgment.
Claims from businesses that have been accounting for tax on fees charged under arrangements such as those adopted by Homeserve: i.e. charging fees under separate contracts with the insured parties and notifying the insured in writing that the fee is an amount so charged, will be paid subject to the normal repayment, capping and unjust enrichment rules.
However, HMRC say that where fees are artificially carved out of what would ordinarily be taxable insurance premium, IPT is properly due.
The department intends to close this perceived loophole and will be consulting informally with the Association of British Insurers and other insurance industry representatives, to ensure the proposed changes to the legislation are properly targeted.
