More bad news for hard-hit Brits (and more grease to the elbow of those championing a Brexit come June this year), as it emerges that millions of us will be slapped with an additional £25 on insurance bills thanks to a controversial EU VAT ruling. According to recent reports, a landmark European Court judgement will put UK-based insurance policy providers in a thankless position which will have ramifications for policyholders.
Reports suggest that EU law-makers will strong-arm insurers here into coughing up VAT to third party companies they facilitate to handle home and motor insurance claims; which will have a knock-on effect for policyholders already bracing themselves for bearing the brunt of the latest round of Treasury-prescribed Insurance Premium Tax rate increases as announced in the Spring budget just gone.
In real terms insurance industry observers are forecasting that such a move would result in an estimated £8 per year ramping up of buildings and home contents insurance and a projected £10 being added to the average home insurance premium, while average motor insurance premiums will rise by £14 as a consequence of these VAT demands.
However experts are warning that the final bill could prove to be even more catastrophic for those motorists/policyholders considered more riskier when it comes to insurance quotes, for example younger drivers. It’s not beyond the realms of possibility that the Treasury could ultimately block the EU directive, yet this outcome remains highly unlikely says one global taxation expert who believes the hike will be inevitable. Speaking exclusively to The Sun, Vice President of US tax giants, Avalara, Richard Asquith conceded; “There is a 70% chance of it being enforced if the UK remains in the EU.”
Average £25 Increase in Policies on Cards as EU Demands Claim Handling Outsourcers Bill Insurers
Stopping short of full-scale scaremongering, a number of leading insurance authorities have expressed concern about the consequences of such revisions, with some suggesting that the EU ruling ‘could result in significantly increased operating costs for UK insurers and an impact on policy premiums as a result’, whilst others predict such a turn of events could instigate a ‘multi-billion pound rise in premiums across the country’.
As to where the proposals came from in the first place, and it appears that the ruling was based on a recent judgement delivered by the European Court on an individual case last month, which concluded that insurance claims handling services are not exempt from VAT; and as such any outsourcing company invoicing an insurance provider will henceforth be obliged to charge them an additional 20%.
Unfortunately from a British insurance industry perspective, the UK is acknowledged as one of the prominent countries when it comes to outsourcing, so should be prepared to absorb a hefty bill, along with other outsourcing leaders including both Ireland and Poland. Naturally the pro-leave the EU camp have seized on this revelation, commenting that a new tax on insurance as the one outlined will subsequently see families paying more for home and motor insurance policies, adding that the only way to put a stop to the EU from making such demands on insurers is to withdraw our membership via the forthcoming public referendum.