23 Nov 2016, 4:45 pm
Phillip Hammond said that IPT was half the rate of VAT and lower than in many countries, and said that the government would use taxation to fund some of the commitments in the Autumn Statement.
The government's projection is that the move will raise an extra £680 million in the next tax year and £840m the following year.
The government has also proposed measures to reduce the number of whiplash claims in a move it hopes will save those buying insurance £40 per year because of reduced claims.
"To the extent it relates to motor insurance the IPT rise will partly offset some of the estimated £1 billion premium benefit from the clampdown on whiplash claims," said insurance expert Matthew Taylor of Pinsent Masons, the law firm behind Out-Law.com. "The government clearly expects the industry to take some of the hit as IPT is described as a tax on insurance companies. The final outcome will need careful explanation.
VAT expert Darren Mellor-Clark said that the move came in spite of protests from business. "The chancellor's despatch box aside to the effect that IPT is currently half the rate of VAT may well be taken as a warning of further increases to come. Commentators have frequently noted the fiscal hole created by the VAT exemption for insurance business."