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Compensation does not reduce IPT

Compensation for mis-sold insurance is not a refund of insurance premiums. Therefore there is no basis for refunding the insurance premium tax (IPT) on those premiums.

The company sold insurance against identity theft. Following an investigation by the Financial Conduct Authority and its predecessor body, it was held that the insurance had been mis-sold. Customers should be compensated.

The tribunal agreed with HMRC that there was no liability to refund IPT. The policies had not been cancelled.

The case report can be downloaded from here.

Homecare Insurance Ltd [2019] TC 7284 [19.08]