Chapter GIM12070

CourtHM Revenue & Customs
Published date15 April 2016
Record NumberGIM12070

True premium taxes (such as the United Kingdom’s insurance premium tax) are in the nature of indirect taxes, and while they are usually collected from the insurer they will normally be passed on to the policy holder by way of an addition to the policy premium. They will invariably be outside the specific taxes listed in any tax treaty; will not be “substantially similar” to the listed taxes; and will not qualify for unilateral relief under ICTA88/S790 because they do not correspond to UK corporation tax. In some states, however, such as Sweden, a proportion of an overseas insurer’s premium income is treated as a deemed profit, which is then subjected to the state’s normal income tax regime. In principle, such taxes qualify for credit relief, subject to the restrictions mentioned below.


The United States federal excise tax is something of a special case. This is charged on insurance and reinsurance premiums paid to foreign insurers at a rate of 4% or 1%. The1975 UK/USA DTC provided an exemption from the tax where the premiums “are the receipts of a business of insurance carried on by an enterprise of the United Kingdom”. Under the 1975 agreement, a UK insurance company was not normally liable to the tax and was not entitled to any credit for it. The 2001 UK/USA...

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