HM Revenue and Customs (HMRC), the UK Government department responsible for the collection of taxes, is targeting captive insurance companies as part of its consultation on insurance premium tax (IPT).
The HMRC consultation on IPT is engineered to make it easy for taxpayers to pay the right tax at the right time and address instances of unfair outcomes.
HMRC issued a call for evidence on the operation of IPT, which is a tax on insurers that covers general insurance premiums for risks located in the UK, to assist with its review of the tax on 3 June.
Captives are one of the policy areas under review in the consultation, as HMRC noted they are “commonly located in overseas tax jurisdictions which can lack transparency”, which means “the effectiveness of HMRC’s statutory information powers is therefore limited in these instances”.
HMRC is specifically focused on establishing whether it is necessary to require captives to declare who their immediate or ultimate parent company are.
In the consultation, HMRC explained: “Where a captive registers for IPT, the parent will normally be located in the UK.”
“Currently, captives are not required to report who their parent entity is. This information would allow HMRC to better understand both the business of the insured party and the types of risks being underwritten.”
HMRC added: “One option for addressing this includes a requirement at the time of registration
to tell HMRC who a captive’s immediate and/or ultimate parent is.”
In order to assist HMRC to make a decision regarding captives, the consultation is asking for information “to help quantify the administrative impact on businesses from requiring captives to declare their parent”.
