Ensuring Insurance Premium Tax (IPT) compliance can be a complex task. With tax rates and filing varying from country to country, many organisations choose to work with Sovos to ease their IPT compliance workload and for tax peace of mind.
We spoke to Neal Bazeley, supervisor of client money about Sovos’ solution for IPT compliance payments and why customers value this service.
What is Client Money for IPT?
Unlike other IPT compliance providers, for our customers we provide a simple endpoint to settle international tax liabilities in a single payment. Through our network of international subsidiaries and partners, we can pay taxes in over 30 countries.
As a team, we’re responsible for client funds from the moment they’re credited to our account to the point the monies arrive at the respective tax office.
- The client money team is responsible for:
- Maintaining and managing funds across 13 currencies and in segregated bank accounts
- Making payments to tax authorities on behalf of our customers in the local currency and preferred payment method of each tax authority
- Providing a statement of all transactions carried out on clients’ behalf in all applicable currencies as well as proof and tracking of each payment
We currently have bank accounts in 13 different currencies with our main bank provider here in the UK. We offer clients the choice to send in funds to us in the currency of the territories they have liabilities in or send all combined funds to one account and we transfer accordingly.
Using our proprietary software, we manage the funds sent to us and allocate to each client account accordingly. This software works with Sovos IPT to ensure funds are linked to liabilities. When payments are due, we use Sovos IPT to generate the necessary payment file that is uploaded to our bank online portal. This then creates a payment in the correct format required by the respective tax authorities.
At the start of each month we generate a statement of account for all clients showing funds in and payments made in the preceding month. We work tirelessly to ensure that every statement is entirely accurate and reflects the period’s transactions.
Issues can occur when clients send funds with no clear indication of which entity they relate to or when tax offices collect payment or refund differences without communication. We pride ourselves on ensuring that these issues are dealt with as they arise so our customers can be confident in the knowledge that their statement is entirely representative of the work we do on their behalf.
In most cases the central government is responsible for taxation and finance and will accept any payment method, providing it is full and accurate. There are however some exceptions. We maintain currency accounts domiciled in Greece, Italy, Portugal and Spain as these territories require payments to be made from a local account. Italy and Spain present challenges because they require each payment to be routed to each commune or region where tax is due. To complicate matters further, they have specific payment types which cannot be accessed by the layman. These territories are exceptions.
Cross-border IPT payments
While it may seem that cross-border payments are simple, this isn’t the case. No two countries are the same, with each territory having their own set of rules and regulations. We are constantly updating our processes to adapt to any changes that occur to ensure our customers remain compliant.
Brexit has changed the way we work as a team. Legislation has meant our preferred method of SWIFT payments became prohibitively expensive overnight. We therefore amended our payment deadlines to take these changes into account. We responded quickly to the developing situation – having no prior notice of the change – to ensure we wouldn’t have to pass on these extra fees to our insurance customers.
Paired with Brexit, the Coronavirus pandemic forced our banking partners to begin implementing negative interest rates in currencies where central banks had to adjust their rates to counteract the economic downturn. Being a large client fund we had to implement a system that accurately predicted and recharged the constantly changing fees that were being incurred. Within the space of a couple of months, we had to overhaul our operation to ensure that funds were received and paid by strict deadlines, avoiding negative interest charges on stagnant deposits and leaving enough time for payments to be processed accurately.
Want to learn more about how IPT Client Money can ease your IPT compliance burden? Get in touch.