It’s been a tough year for businesses. Whilst many have accepted that 2020 is likely to be a year to forget, unfortunately tax still needs filing and paying. Tax authorities have been understanding – nobody could have foreseen this – and there has been a concerted effort to provide SMEs with tax relief and postponements where possible.
But what about insurers? Should they also receive a tax break on insurance premiums from the government?
Breaks for IPT
In some cases, it’s the insured that have benefited from an IPT holiday, with insurers themselves granting payment extensions to policyholders and delaying the tax payment to authorities as a result.
As it stands there are no blanket rules for IPT relief and very few tax authorities have offered any formal grace periods. Part of this is down to IPT being an indirect tax. It is also clear that governments need the tax revenue generated from IPT now more than ever.
The Netherlands has provided the option to request a payment delay (insurers were required to file their Q1 2020 return and then send a request not to pay). Italy granted a one-month delay from the end of May to the end of June for the filing of annual returns, but in this case taxes were already paid so whilst the delay itself didn’t provide a financial benefit it did ease the admin burden and provide some relief for insurers. But all in all, most governments have continued their IPT reporting and payments as normal.
The biggest impact for IPT has not been to payments, but to processes.
Portugal has had to postpone its move to a new digital reporting system. It wasn’t feasible to implement new compliance processes whilst much of the country is working from home and so local authorities made the decision to wait for a more suitable time. The new reporting system will be a significant change once it’s eventually implemented, with a new date set for February 2021.
The results of HMRC’s consultation on the operation of IPT has also been delayed. It has finally been released just one year after the consultation opened. Overall the message addressed by the insurance industry to HMRC is to hold on changes. The UK has seen both increases in its IPT rates and a move to online IPT filing in recent years. So far, HMRC has not committed to further changes.
It doesn’t look as though an IPT holiday is likely to happen unilaterally. There may be other tax relief schemes that could benefit insurers, but IPT payments will still go ahead as normal.
Although a delay to IPT payments sounds appealing, having to file and pay taxes out of your usual schedule could cause errors and confusion at a time when businesses are focused on the bigger picture. With many governments deferring VAT filing and payments, insurers and their tax teams have more than enough to contend with in a highly disruptive period of history. For now, IPT will continue as normal.