The Charity Tax Group (CTG) is warning charities to expect higher insurance premiums this year as the headline rate of Insurance Premium Tax (IPT) rises from 10 to 12 per cent.
Charites do not benefit from an exemption from IPT, so insurers which choose to pass on these costs to consumers will also pass them on to not-for-profit organisations.
John Hemming, CTG chairman, said the move will have a disproportionate effect on charities, especially those with a large portfolio of operational buildings and extensive transport and travel commitments.
The CTG recently launched a charity IPT survey which it plans to publish later this month.
It said a large number of village halls responded to its survey, and while in monetary terms the additional cost is relatively low, their IPT burden now represents a significant proportion of their overall expenditure.
For the largest five insurance payers in its survey alone, the increase will cost a total of £170,000, with their total IPT costs in 2017 now over £1 million.
“CTG is working with the Association of British Insurers (ABI) and sector partners to develop this evidence base to support our representations to Government for a freeze on IPT increases for charities or the extension of existing limited reliefs,” said Mr Hemming.
“While we recognise that it would be inappropriate for charities to benefit from exemptions on private medical insurance for staff, there is a very strong case for relief where insurance is a necessary and responsible requirement as part core charitable activities.”
Earlier this year, Jane Ellison, the then Financial Secretary to the Treasury, said it would be challenging to implement an exemption for insurance purchased by any specific group.
“Any such legislation would be very difficult for insurers to implement since this would require them to differentiate between customers who were buying the same type of insurance products,” she said.
IPT increased from 1 June 2017.