• 07 February 2019
  • Tax

Why should Indirect Tax professionals consider specialising in Insurance Premium Tax?

Insurance Premium Tax (IPT) is certainly not the most common form of indirect tax that springs to mind. In fact, I could be bold enough to say that the majority of people have never heard of it! But if you look closely at those insurance policies we all make - whether that’s motor, holiday, contents, or pet insurance - then you’ll see ‘IPT’ highlighted in the billing section of your quote.

So what is IPT?

IPT is an indirect tax on insurers which covers general insurance premiums such as motor, travel, mechanical and electrical. Of course, VAT is generally the first point of call when you think of an indirect tax, however, IPT is idiosyncratic to the insurance sector.

And, like VAT, different rates apply across different European jurisdictions. Check out the current global IPT rates here.

With the insurance sector growing at a rapid pace (and forming a significant part of London’s financial market), IPT offers an excellent niche for ambitious indirect tax professionals.

It becomes immediately apparent that the bulk of the job market within the insurance industry is situated in the private sector. This shouldn’t come as a surprise since, as of 2016, there were 934 general insurers in the UK (340 have their headquarters UK based). However, with Brexit looming over Europe, there are some significant changes afield. Only a few months ago, it was announced that two of Lloyd’s of London’s largest insurance syndicates, XL Group & Beazley, would be relocating their headquarters to Dublin. Is this a trend on the rise? A tale of two sides retrospectively as AIG, Allianz (amongst others) have ignored calls for what they deem ‘hasty relocations’ and have gone as far as establishing new operations in Britain.

So, with IPT professionals largely being based in the UK & Germany, we could start to see this skill set disperse across the wider European continent following Brexit.

IPT is a viable career option for Indirect Tax professionals

To the aspiring indirect tax professional, you may have had some exposure to this before, but have you ever considered that it’s a viable opportunity to develop a sought-after indirect tax specialism?

Being a recruiter who focuses solely on identifying talent across the EMEA indirect tax market, it’s common that many of our candidates come from an industry-specific background, whether that’s Real Estate, TMT, Financial Services, Automotive, and so on.

But with the insurance sector growing at a rapid rate - as with the emphasis on having industry-specific tax professionals in either professional services or in-house teams - there’s a clear skills gap in the market for dedicated IPT professionals. In other words, the demand versus supply of IPT professionals being heavily imbalanced.

So, as an Indirect Tax professional, specialising in IPT (providing you’re actually interested in the insurance sector!) is a niche route to progress your career, become an industry expert, and improve your prospects of achieving senior positions such as Director, Head of Tax, and Partner.

The take-home here is that, just because you’ve acquired a niche focus, it doesn’t prohibit your career prospects. In many ways, it can be optimal for career development.

What is the role of an IPT specialist?

Albeit a niche specialism, a career in IPT can still be diverse, with opportunities presenting themselves across insurance companies, professional services, Big 4 specialist teams, and tax software houses.

As an IPT professional at the start of their indirect tax career, the beginning may have an emphasis on compliance-based duties, such as preparing and filing IPT obligations as well as other analytical reporting responsibilities. But eventually, this will progress into a more varied job description that consists of advisory responsibilities, operational projects, and leading or managing teams.

This sort of progression follows the same track you’d find in a generalist indirect tax role but the earning potential is likely to be greater.

What is the earning potential of working in IPT?

Through recording data from job advertisements, previous vacancies, and the numerous contacts I have in the IPT sector, I’ve included a table below for the average UK IPT salary ranges.

  Position

  Regional (£)

  London (£)

  Analyst / Assistant

  22K – 27K

  25K – 35K

  Senior Analyst / Accountant

  28K – 37K

  33K – 45K

  Assistant Manager

  40K – 56K

  45K – 66K

  Manager

  55K – 86K

  70K – 100K

  Snr Manager / Director / Head of IPT

  80K +

  95K +

 

As always, there are discrepancies based on how extensive and specialised your experience is. One example may be working within an insurance company, where the role could be slightly more generalised across the taxes (IPT, VAT, Corporate Tax, etc.).

While London is currently a key hub of global IPT activity, these roles can also be found across other European countries. As of 2016, 563 of the 934 UK insurers were based around Europe, with countries such as Germany and Switzerland being the most influential insurance areas. However, it’s speculated that Malta is becoming a strategic location of global insurers due to the efficiency and ease of setting up captive insurers (subsidiary insurance companies set up by parent companies to reduce risk).

Conclusion

IPT generally isn’t the conventional direction that tax professionals dream of when starting their career but there’s an appeal of IPT that cannot be ignored.

While indirect tax, in general, is still a candidate short market, what better way to distinguish yourself within the indirect tax world as a specialist in a growing global market? Remember, the choices aren’t as limited as you may think!

With more and more insurers looking to bring their IPT obligations in-house, now is a better time than any to make the transition. If you’d like more information on Europe’s IPT market, please get in touch.

 

Ed Moore is a Senior Consultant in the Tax Division at Harvey John.

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