Taxation – British Insurance Brokers' Association https://www.biba.org.uk The British Insurance Brokers' Association is the UK's leading general insurance intermediary organisation Thu, 06 Dec 2018 15:07:07 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.8 154303522 Criminal Finances Act set for tax evasion crackdown https://www.biba.org.uk/regulation-updates/criminal-finances-act-set-tax-evasion-crackdown/ Fri, 25 Aug 2017 09:16:29 +0000 https://www.biba.org.uk/?p=27827 Criminal Finances Act set for tax evasion crackdown New measures introduced under the Criminal Finances Act 2017 will make companies and partnerships criminally liable for

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Criminal Finances Act set for tax evasion crackdown

New measures introduced under the Criminal Finances Act 2017 will make companies and partnerships criminally liable for failing to prevent tax evasion by either a member of their staff or an external agent from 30 September 2017.   Prosecution could lead to both a conviction and unlimited financial penalties.

Where an insurance intermediary places business that is liable for UK Insurance Premium Tax (IPT) with an overseas insurer that is not registered in the UK for tax purposes and no arrangement exists to collect the IPT, the intermediary could be found guilty of this offence.

Part 3 of the Act, which is designed to reinforce the integrity of the UK’s economy, introduces two new criminal offences to tackle the corporate facilitation of tax evasion:

  • The domestic fraud offence – which criminalises corporations, based anywhere is the world, which fail to put in place reasonable procedures to prevent their representatives from criminally facilitating tax evasion (section 45).
  • The overseas fraud offence – which criminalises corporations carrying out a business in the UK, which fail to put in place reasonable procedures to prevent their representatives facilitating tax evasion in another jurisdiction (section 46).

The new offence does not radically alter what is criminal, it simply focuses on who is held to account for acts contrary to the current criminal law.  It does this by focussing on the failure to prevent the crimes of those who act for or on behalf of a corporation, rather than trying to attribute criminal acts to that corporation.

How will the new offence work?

For the corporation to be liable under the new offence, there must have been:

  • Stage one: criminal tax evasion by a taxpayer (either an individual or an entity) under the existing law.
  • Stage two: criminal facilitation of this offence by a representative of the corporation, as defined by the Accessories and Abettors Act 1861.
  • Stage three: the corporation failed to prevent its representative from committing the criminal act outlined at stage two.

The three stages apply to both the domestic and foreign tax evasion offences, although there are additional requirements for the foreign offence (including a ‘dual criminality’ requirement).

Defence

The corporation may choose to put forward a defence (on the balance of probabilities) of having put in place “reasonable prevention procedures” to prevent the action at stage two.  HM Revenue & Customs (HMRC) is responsible for producing that guidance (see link below) for businesses to follow and a draft of it is currently available on its website.  Final guidance is pending now that Royal Assent for the legislation has been given.

What do businesses need to do?

Businesses will need to put in place policies and processes so that they may use the defence of having ‘reasonable prevention procedures’.  The HMRC guidance (see link below) explains the policy behind the new offences and is intended to help businesses understand the types of processes and procedures that can be put in place to prevent associated persons from criminally facilitating tax evasion.

The guidance is designed to be of general application and is formulated around the following six guiding principles:

  1. Risk assessment;
  2. Proportionality of risk-based prevention procedures;
  3. Top level commitment;
  4. Due diligence;
  5. Communication (including training); and
  6. Monitoring and review.

The first step will be for businesses to review and identify risk areas and to work out what procedures are appropriate, and how best to implement them, so that commitment is demonstrable and the risk is diminished.

The London & International Insurance Brokers’ Association has put together a set of guiding principles that broking firms should consider implementing in to their working practices which they have kindly said we can share with BIBA members.

Investigations, penalties and sanctions 

The domestic tax offence will be investigated by HM Revenue & Customs, with prosecutions brought by the Crown Prosecution Service (CPS), while the foreign tax offence will be investigated by the Serious Fraud Office (SFO) or National Crime Agency (NCA) and prosecutions will be brought by either the SFO or the CPS.

Further information

Criminal Finances Act 2017

Criminal Finances Act – explanatory notes

Criminal Finances Bill Factsheets

Factsheet 9 – corporate failure to prevent tax evasion

Draft guidance from HM Revenue & Customs for the corporate offence of failure to prevent the facilitation of tax evasion

LIIBA Guiding Principles: Criminal Finances Bill, 2016

BIBA members’ compliance and regulation queries should be directed to: compliance@biba.org.uk.

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Lloyd’s market bulletin Y5090 – Swiss and Liechtenstein tax reporting requirements https://www.biba.org.uk/regulation-updates/swiss-liechtenstein-tax-reporting-requirements/ Mon, 15 May 2017 13:56:47 +0000 https://www.biba.org.uk/?p=27108 Swiss and Liechtenstein tax reporting requirements To advise Lloyd’s underwriters and brokers of changes to the administration of Swiss stamp duty and fire brigade charges

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Swiss and Liechtenstein tax reporting requirements

To advise Lloyd’s underwriters and brokers of changes to the administration of Swiss stamp duty and fire brigade charges and Liechtenstein stamp duty

Effective from 01/07/17

This is to advise that a new Market Bulletin has been issued and is now available via the Lloyd’s website. Please go to www.lloyds.com/marketbulletins for more details.

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Cross industry agreement and transitional arrangements finalised regarding application of June 2017 IPT increase https://www.biba.org.uk/regulation-updates/cross-industry-agreement-transitional-arrangements-finalised-regarding-application-june-2017-insurance-premium-tax-ipt-increase/ Fri, 17 Mar 2017 14:17:42 +0000 https://www.biba.org.uk/?p=26382 On 23 November 2016, the UK Government announced that the standard Insurance Premium Tax (IPT) will increase from 10% to 12%, with effect from 1

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On 23 November 2016, the UK Government announced that the standard Insurance Premium Tax (IPT) will increase from 10% to 12%, with effect from 1 June 2017.  When and how to apply the new rate of IPT have been the subject of a cross market consultation conducted with HM Revenue & Customs (HMRC).  The purpose of discussions was to clarify details regarding the application of this and relevant transitional arrangements.

An agreement was reached between all parties including BIBA and LIIBA and this has resulted in the Association of British Insurers (ABI), the International Underwriting Association (IUA) and Lloyd’s issuing revised guidance, the details of which are noted here.

IUA Guidance

Lloyd’s Guidance

ABI Guidance:
As the ABI guidance has been published to the members’ only area of their website, the detail below has been reproduced here by kind permission of the ABI.

‘June 2017 Insurance Premium Tax (IPT) rate increase

1 The IPT standard rate will increase by 2% – from 10% to 12% – on 1 June 2017.

As announced at Autumn Statement, the Government will introduce legislation in the Finance Bill 2017 to increase the standard rate of IPT from 10% to 12% in the United Kingdom. The changes will take effect from 1 June 2017 for premiums treated as received on or after that date relating to risks for which the period of cover under the terms of an insurance contract begins on or after that date.

2 Backstop date of 1 June 2018

From 1 June 2018, the new rate of 12% applies to all premiums, whether they are received in respect of new or existing risks and regardless of when the cover for those risks began under the contract.

3 Changes to implementation arrangements

After representations from the insurance industry, the implementation arrangements have changed from those applied to previous rate rises. HMRC & HMT consulted with industry representatives on ways of simplifying and improving the way rate changes were introduced in future and the new implementation arrangements for this rate rise follow on from those discussions. HMRC has agreed the principles and examples used in this guidance.

The rules on when and how to apply the new rate can be found here. You will need to undertake your own assessment to understand the application of these changes to your business. This guidance has been designed to assist with that assessment but is not intended to be relied upon as legal advice.

The anti-forestalling provisions will be reviewed and any changes announced at Budget 2017.

4 The standard rate of IPT

The new rate will not apply to all insurance premiums; it will only apply to premiums received under general insurance policies, such as motor, property, liability or medical insurance, which are subject to IPT at the standard rate. Some insurance – such as certain insurance sold with car and domestic appliances and all travel insurance is subject to the higher rate (20%) and will not be affected. About 80% of premiums for insurance contracts are not liable to IPT at all, for example life assurance and other long term insurance.

5 When the rate rise applies

For previous rate rises, when to apply the new rate depended mainly on what tax point method the insurer chose to operate – the cash receipt method or the special accounting scheme (SAS). More information can be found in Notice IPT 1

For this rate rise, the most important consideration is when the cover for the risk/s contained in the insurance policy begins and whether it begins before or after the date of the change in rate (ie 1 June 2017). It is also necessary to consider whether the premium in respect of that cover is treated as received (ie has a tax point under either the SAS or cash method) on or after 1 June 2017. Unless the anti-forestalling rules apply (for further information, click here), premiums with tax points falling before that date will be taxed at the existing rate regardless of when the cover under the policy commences.

There is also a backstop date which means that all premiums treated as received, ie with tax points under either the SAS or cash method, that fall on or after the 1 June 2018 will be taxed at the new 12% rate – regardless of when the cover for the risks under the insurance policy began.

6 Additional Premiums

If there is a mid-term adjustment (MTA) to an existing policy which commenced before 1 June 2017, any additional premium (AP) received by insurers in respect of new risks – ie, a new policy has to be issued – for which the cover began after the implementation date of 1 June 2017 will be liable to tax at 12%.

An MTA will not be in respect of a new risk if it relates to cover permitted under the policy at the time the policy commenced, so that if that cover has not yet commenced the insurer is able to provide that cover if and when it is requested at any time during the life of the policy (subject to it meeting any conditions required by the insurer and payment of any additional premium due). Additional premiums for such MTAs will be taxed at 10%, if received before 1 June 2018.

7 Refunds to Customers/Tax Credits

If any adjustment to a taxable insurance policy results in a refund to the customer, this is known as a return premium. A refund from HMRC of the IPT accounted for on that premium will also be due, and the insurer should claim the overpaid tax at the original rate paid on the premium charged to the customer and accounted for to HMRC (and not at the rate of tax that is in force at the later date).

8 Premiums paid by instalment

Where premium instalment payments are made in respect of risks for which cover began before the implementation date, 1 June 2017, and are received by insurers (ie have a tax point) before 1 June 2018, then insurers are liable to account for IPT at the 10% rate.

Where premium instalment payments are made in respect of risks for which cover began on or after the implementation date of 1 June 2017, then insurers are liable to pay IPT at the new rate of 12%.  If any instalments are received by insurers (ie have a tax point) on or after 1 June 2018 then they will be liable to tax at the new rate of 12% – regardless of when the cover for the risks in the contract began.’

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