Concerns have been expressed by a Teesside-based industry expert that many businesses are unaware that a rise in Insurance Premium Tax (IPT) is due to take effect on November 1.
IPT is set to increase to 9.5 percent and will affect the amount companies have to pay to protect their assets including machinery, buildings and vehicle fleets.
However Jonathan Willett, a Director at Henderson Insurance Brokers Teesside office, fears the change, which was announced in the Budget, was overshadowed by other announcements by the Chancellor and that as a result many business owners are oblivious to the increase.
Mr Willett said: “The November 1 rise could have a negative impact on businesses as unlike VAT, IPT is a non-reclaimable tax.
“The big issue is that previously IPT increased at a steady rate from five to six percent. The latest rise, of 3.5 percent, is a disproportionate jump of 50 percent and is very harsh at a time when many businesses are emerging from a tough economic period.
Mr Willett urges businesses to take expert advice to identify the best insurance deals in order to limit the effect of the 3.5 % rise in taxation
Mr Willett also is concerned the rise could be the first step towards gradually bringing IPT in line with the 20 percent VAT rate, a move already made by other EU member states such as Germany and Holland.
He added: “If this is the plan I would hope that the Government would give companies a break by considering ways of alleviating the additional financial pressure created by an IPT rate similar to the level of VAT.”
The changes come into force on November 1 with the tax increase applying to insurance companies, which will be automatically passed on to policyholders.
The timing of any rise in policyholders’ premiums will depend on the renewal date of their policy.