§ Lord Monson
asked Her Majesty's Government:
How they justify taxing travel insurance on flights and holidays, however austere, at 3.5 times the rate applicable to insurance of property, however valuable. [HL245]
§ Lord McIntosh of Haringey
The higher rate of Insurance Premium Tax (IPT) applied to certain providers of travel insurance was introduced by the previous government to counter VAT avoidance by suppliers of holidays who were artificially manipulating the values from the taxable holiday component of the package to the VAT-exempt insurance element. The IPT higher rate was extended in 1998 to all providers of travel insurance; this retained the anti-avoidance measure while recognising that, with proposed changes to the market, the previous selective application of higher rate IPT might be inappropriate. The opportunity for value shifting does not normally arise with property insurance.