HM Customs and Excise  CE 9
                                                  17 March 1998
______________________________________________________________

CHANGE TO INSURANCE PREMIUM TAX ON TRAVEL INSURANCE  

The Chancellor announced today that the higher rate of
Insurance Premium Tax  (IPT) of 17.5 per cent will be extended
to all sales of travel insurance, in recognition  of likely
changes in the market in travel insurance which make it
inappropriate to  continue to apply the higher rate only to
such insurance sold by travel agents and  tour operators. The
change is effective from 1 August 1998. 


DETAILS

At present, the higher IPT rate of 17.5 per cent applies to
travel insurance only when  it is sold by travel agents or
tour operators. The change will mean the higher rate will 
apply to all travel insurance. In addition, it will now also
apply to travel insurance  supplied free of charge to the
customer, for instance as part of a holiday package. 
Currently the premium paid to the insurer for such insurance
e.g. by a travel agent, is  liable to the standard rate of
IPT.


NOTES FOR EDITORS

1. The higher rate of IPT, which is an anti-tax avoidance
measure, came into effect  on 1 April 1997. It applies to
insurance sold by suppliers of cars and domestic  appliances
and also to sales of travel insurance by travel agents and
tour operators.  
2. Since the introduction of the higher rate, the travel
industry has claimed that this  measure has led to their
losing business to other providers of travel insurance, such 
as direct insurers, banks and building societies, who pay IPT
at only 4 per cent.  However, no firm evidence has yet been
produced to link this change in buying  habits, which
continues a long-standing trend, to the price effect of the
higher rate of  IPT.

3. There has been, though, some change in the balance in the
market for travel  insurance, for reasons other than the price
effect of IPT, and these changes may be  amplified if the
Monopolies and Mergers Commission proposals to ban the travel 
industry practice of linking holiday discounts to the purchase
of travel insurance are  implemented. The higher rate of IPT
has therefore been modified in anticipation of  these various
likely developments and will apply to all travel insurance,
regardless of  provider.  The withdrawal of the concession
that allowed tour operators and travel 
agents to account for standard rate IPT on free insurance
recognises the fact that all  providers of travel insurance
will now be subject to the same rate of IPT. 
4. The extra revenue raised from this change to IPT will be 5m
pounds in 1998/99,  15m pounds in 1999/2000 and 20m pounds in
2000/2001.

5. A compliance cost assessment for the extension of the
higher rate will be  prepared following consultation with
those affected. Although this measure will bring  more
suppliers into the scope of the higher rate, the introduction
of a uniform rate for  all travel insurance will also ease
administration in this sector. 
6. Details for insurers and others affected are in Budget
Notice 22/98. 



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Relations Office, New  King's Beam House, 22 Upper Ground,
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also be found at this address.