With charities being essentially different from businesses, why is the Insurance Premium Tax (IPT) not among the exemptions they enjoy? That is the puzzling thought for specialist insurer
Ecclesiastical, which has teamed up with the Charity Finance Group (CFG) to call on the government to look into granting an exemption.
Everyone awaits tomorrow’s Budget, when it will be made known whether the IPT increases from the current 12% rate.
Several groups, including the Association of British Insurers (ABI), have expressed their opposition to further hikes – the trade body going as far as launching a campaign to stress its view that the tax is unfair for businesses and individuals alike.
As for charities, thousands of which are insured by Ecclesiastical, they feel the brunt too. Since January, the insurer has been working with CFG to raise awareness as the tax is costing charities millions yearly.
“At a time when charities face increasing and more complex demands on services, a strain on finances, and economic uncertainty, the government should not increase charities’ overheads,” said Andrew O’Brien, CFG director of policy and engagement. “If the Chancellor decides to raise IPT even higher, the result will simply be less money for charities to spend on their charitable activities.”
O’Brien stated: “We urge the Chancellor [Philip Hammond] to reduce the costs of IPT for charities in the short term, with a view to exempting charities in the longer term.”
“Buying insurance is an unavoidable cost for charities; either because they are legally required to, or because they are acting responsibly by putting adequate protection in place for their activities and assets,” explained David Britton, charity director at Ecclesiastical. “The average charity is now paying £300 in IPT on top of their insurance premium, compared to £150 just two years ago.”
Britton continued: “The Government has long recognised that charities should be treated differently to commercial businesses by granting reductions and exemptions from other taxes, including VAT, business rate relief, and Gift Aid, so it seems strange that IPT is currently an exception to that rule.”
“Alongside CFG, we are urging the Government to consider very carefully the negative impact the increases in IPT are having on the work that charities do and consider granting them an exemption from this tax,” he said.
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