Legislation is always evolving, and legislation covering Insurance Premium Tax (IPT) and the relevant parafiscal taxes is no different.
As IPT is so niche, references to other legislation are often made – this can be to a finance act, VAT, or another piece of tax related legislation. And on top of this, there are the extra amendments, and amendments to the amendments!
I’m aware that researching and piecing together the puzzle of different legislation requires a skill set like no other and often think it’s an art being able to pull all the correct strands together. Having so many complicated references to follow to find the answer, you’re often left wondering if this can be misinterpreted and if so, have you fallen into that trap.
So, how does this impact IPT legislation today?
Insurance Premium Tax penalties and interest
Penalties and interest are becoming more prevalent in current times. In the past, tax authorities may have taken the view that they would only penalise if the action was fraudulent and apply some interest. Now, there is more of an emphasis that this is a source of extra income.
Trying to find the correct piece of legislation or advice that details how penalties or interests should be calculated can be difficult. Some legislation dates back prior to the 1900s, and it can take time to read through legislation to understand if there have been any amendments from the original section or if it has been superseded by another.
Some territories require penalties and interests to be paid alongside the tax, which can cause issues if the calculation method is incorrect or vital information is missed on the correct percentage to apply. Does this mean penalties on penalties, or interest on unpaid penalties? The short answer to that is in most cases, yes.
Apart from the usual penalties and interests there can be further repercussions. Some tax authorities can revoke passporting rights for EU insurers writing on a Freedom of Service basis. Others can freeze local bank accounts, or withdraw money directly, as well as potential prison sentences for directors of companies.
The legislation that allows tax authorities to imprison someone are stated in some of the earlier pieces when the Mutual Assistance Directive didn’t exist and the tax authorities didn’t have as much freedom.
Where the economic climate is changing, tax authorities are looking at ways of generating additional income. This is making the review of historic legislation even more prominent, to be aware of any clauses that could close the tax gap.
We’ve seen tax authorities move towards more policy information reporting. This is likely to lead to more remote audits and investigations following a few years of report submissions. Trends and analysis of audit data will become easier for the tax officer to perform, with anomalies being easier to spot. With the reference to old legislation, could this be the start of more stringent penalties being applied?