Question 2 of the Sept 2014 exam looks at a proposal for motor insurance through a car manufacturer. In the solution, one of the items to consider is "Possible tax risk of shifting value to IPT rate rather than VAT rate product" Can someone please explain this point? Thanks
The point here is that by wrapping up the insurance with the car purchase some of the "purchase price" could be deemed to relate to an insurance premium and therefore liable to Insurance Premium Tax as opposed to Value Added Tax which would apply to the purchase of the vehicle. The question concerned was non-UK specific so they were really expecting you to make the point that there could be tax implications for the insurer arising from the arrangement. That should have been sufficient to obtain the necessary credit in the exam.
