With effect from 1st November 2015, the tax payable on insurance premiums is increasing from 6% to 9.5%. This marks an increase of more than 50% and a step towards the prospect of much higher rates, consistent with those charged to our European neighbours.
Commentators within the insurance industry have shown concern about the rise in taxation and possible changes in the insurance market.
Where landlords have chosen to operate their Option to Tax, the government will be charging 20% VAT on top of the 9.5% insurance premium tax. Businesses in the finance sector and charities cannot generally recover VAT and effectively suffer a tax on tax. Insurers, banks and brokers may not find much sympathy, but charities will particularly suffer with a total Tax in excess of 30%. Charities currently receive 80% relief in their Business Rates charge. Some more of this benefit will now be paid back.
Day and Bell will continue to monitor the impact on these changes, especially the potential impact on charity shops and financial sector tenants in our portfolio.