Protection  

Hammond's tax hike labelled a disappointment

 

Chancellor Philip Hammond's insurance premium tax is both a disappointment and a challenge to the insurance industry, the intermediary distribution director for Axa PPP Healthcare, has claimed.

Paul Moulton said: "It is disappointing to see that the health and work policy the government has espoused, which encourages employers to take a more active role in getting their employees to get and remain healthy,   is in conflict with their fiscal policy.

"It is particularly challenging for individuals and smaller businesses who take the time and cost to provide healthcare and, in part, alleviate the burden on the NHS, to be hit with these increases in insurance premium tax (IPT)."

The tax increase was announced in last year's Autumn Statement - Mr Hammond's first and his last - in which he said the UK was enjoying "one of the lowest IPT rates in Europe". So he raised it.

At the time, the chancellor said: "Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT.

"In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10 per cent currently, to 12 per cent from next June [June 2017]."

However, many companies have started to look at creating healthcare trusts, by which they might be able to underwrite their insurance needs themselves, effectively self-insuring their workplace healthcare benefits.

Yet while larger organisations can look at propositions to alleviate the burden, such as implementing healthcare trusts, Mr Moulton told FTAdviser these sorts of options are not always available to smaller businesses.

Moreover, Mr Moulton said, these healthcare trusts can be complicated and specialist advice would need to be sought. He confirmed Axa PPP Healthcare would still make the case for no further IPT increases.

He commented: "It is telling that when the next round of IPT increases hit in May, the UK will have the third highest IPT rate for healthcare in the whole of Europe, behind only Greece and France, and most countries have a zero rate healthcare, as compared to IPT on general insurance."

In terms of taxation and regulation, "more carrot less stick", he said, would be important when it comes to making people aware of the benefits of getting proper healthcare cover.

Mr Moulton said it was also clear that advisers could do more to help individuals and their business clients to consider take up of workplace protection, regardless of tax increases.

He said: "It is still a well-sought after employee benefit. And in these days of strain on the NHS, an individual being able to gain access at a time that suits them and their business, in a location that suits them and their family, is an important benefit."