Insurer Aviva has called upon the UK Government to freeze insurance premium tax (IPT). Otherwise, the insurer suggests, as many as two-thirds of British small to medium-sized enterprises (SMEs) may be forced to either reduce or entirely cut non-mandatory insurance.
Aviva cited a recent study that found that should IPT increase ahead of the announcement of the government’s Autumn Budget in one week’s time, 31 per cent of SMEs would reduce non-essential cover, while 36 per cent would cut them.
“The government has already doubled the rate of IPT over the last there years, and businesses have shouldered this burden,” commented Phil Bayles, Aviva’s Managing Director of UK intermediaries. “But as our research clearly shows, a further increase in IPT could force a majority of SMEs to put themselves at risk of underinsurance – or, worse, forego cover for vital but non-mandatory insurance such as business interruption.”
Bayles said that the government was right to describe small businesses as a key plank of the UK economy, fuelling economic growth and employment, but that he is very concerned that – especially at a time of pervasive uncertainty due to Brexit – further IPT increases could have major economic repercussions.
“Imagine a small business that is already financially stressed and decides to cut non-essential insurance due to rising costs,” he said. “Without the security that insurance provides, they are one accident away from going out of business. And unlike VAT, a small business cannot claim back IPT. We must not place this important sector at such great risk.”
Since raising IPT from 10 per cent to 12 per cent in June 2017, the government has accrued approximately £6 billion from the tax; this represents an increase of 22 per cent compared with the equivalent period before the increase.