Travel insurance tax levels are an anachronism, claims specialist
Friday, 03 Jan, 2011
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A travel insurance specialist has called for a standardisation across all types of taxation and warned that high levies on holidaymakers could deter the most vulnerable covering themselves.
Director at Hampshire-based PJ Hayman Peter Hayman highlights that from tomorrow the Government will collect 20% tax on all travel insurance premiums, which is in line with the VAT rise, but which is considerably more than the amount paid to the taxman by those taking out motor or home insurance, which has only gone up from 5% to 6%.
Insurance services are exempt from VAT but subject to Insurance Premium Tax (IPT) which rises 1% for 2011. The only exception to this is travel insurance which is subject to normal VAT levels.
Said Hayman: “Many people will not be aware that from a typical £20 travel insurance premium, £3.33 is taken in tax.
“The higher rate was initially introduced in an attempt to deter travel agents from giving holiday discounts on the condition that travel insurance was purchased as part of a package. Sales through the travel trade currently represent less than one fifth of total premiums and therefore such a high level of tax is now an anachronism.”
He added: “There is a danger that this increase in travel insurance premiums will deter travellers from purchasing essential cover. In particular, those most affected are people who have to pay higher premiums due to age, ill health or deciding to take a gap year.
“We ask that the Government puts this on its list of taxes for review as being unfair and inappropriate.”
by Dinah Hatch
Dinah
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