In today’s budget the United Kingdom Government’s Chancellor of the Exchequer (Finance Minister) George Osborne has unveiled another increase the standard rate of UK Insurance Premium Tax (IPT) by 0.5 % from 9.5 % to 10%.
This follows a rise in UK IPT unveiled last year that increased the standard rate by 3.5%.
UK IPT is a type of indirect tax levied on general insurance premiums in the United Kingdom.
UK IPT is therefore levied on the insurance premiums for private yachts registered under the British flag in the United Kingdom (i.e. London) regardless of where the owner is located, where the vessel is based or operates or where the insurance is arranged.
It should be noted that IPT is not just a UK tax, in fact, insurance premiums in most countries are subject to some form of indirect taxation.
For example, the equivalent IPT on yacht insurance premiums on private yachts is 21% if registered in Holland, 19% if registered in France or Germany, 12.50% if registered in Italy and 5% if registered in Switzerland.
It is however possible for owners to save money on their hull and third party insurance by registering their yacht in a jurisdiction where there are no taxes levied on insurance premiums.
For example, the insurance premiums on yachts registered under the British flag in the ‘offshore’ registries forming the red ensign group such as the Jersey, Guernsey, Cayman Islands and the Isle of Man are not subject to UK or any form of insurance premium tax.
Malta, another popular yacht registry jurisdiction, also does not levy insurance premium tax on hull or third-party insurance.
To put figures into perspective we recently changed the port of registry on a UK registered 70ft motor yacht from London to Jersey saving the owner approximately GBP £1,000.00 per annum on their insurance.
The first year IPT saving comfortably covered the all inclusive Oceanskies transfer of port fee.
In conclusion, today’s increase in UK IPT is in line with a global trend for increases in taxes levied on insurance premiums.
IPT is not an insignificant amount and should be included as one of the important considerations for an owner when choosing the port of registry for their yacht.
For assistance with flag state selection and yacht registration please do not hesitate to contact us.